Owner of the Year: Brandywine Realty Trust

Plymouth Meeting, Pa.-based Brandywine Realty Trust has established itself over the past decade as one of the big fish among the region's suburban office landlords. But in 2004, the real estate investment trust made a splash in the urban market.

By Jim Parsons

At first glance, 2004 was business as usual for Brandywine Realty Trust, Mid-Atlantic Construction's Owner of the Year.

Gerard Sweeney, president and chief executive officer of Brandywine Property Trust, spent years building his company's presence in suburban markets through infill projects. Today, he helps expand the REIT's focus to urban projects, including Philadelphia's Cira Centre and the planned Two Christina Centre in Wilmington.

Already the largest suburban office landlord in metropolitan Philadelphia, the Plymouth Meeting, Pa.-based real estate investment trust added to its healthy portfolio by investing more than $738 million in new developments and property acquisitions.

By the end of the year, Brandywine owned, operated or had an interest in nearly 300 office and industrial properties totaling 23.7 million sq. ft. concentrated primarily in Pennsylvania, New Jersey and Delaware, plus a land inventory capable of supporting another 3 million sq. ft. of new construction.

But unlike previous years, Brandywine made a bold entry into the region's urban markets. Leading the way was the construction start of Cira Centre, Philadelphia's first office tower in 12 years and an overdue first step toward developing the area surrounding Amtrak's 30th Street Station. Brandywine also launched plans for downtown developments in Philadelphia and Wilmington, Del., totaling 1.4 million sq. ft., and added 3.5 million sq. ft. of landmark properties through a cash- and debt-assumption deal with the Rubenstein Co. of Philadelphia.

These moves promise to do more than simply bolster the bottom line of an already successful full-service real estate company. Brandywine's urban initiatives hold the potential to be construction catalysts that stimulate long-dormant business and industrial districts while further diversifying the economic profile of others.

A strategy with symmetry

Venturing into the world of office towers and downtown development may seem like a major strategic shift for a company that made its name in the suburban arena. But Brandywine President and CEO Gerard H. Sweeney doesn't see it that way.

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"For years, we focused on suburban infill projects such as town centers in areas with well-developed infrastructure systems," he said. "We saw the opportunity to do Cira Centre as a natural extension of that strategy. The site had the attributes of infrastructure and multimodal access. We felt the right ingredients were present to create something of value provided we could deliver a building of good quality."

Such timing has been rare for venerable 30th Street Station and the adjacent Amtrak-owned industrial properties that define the edge of the University City neighborhood. Development plans came and went over the years, but none took hold due to costs, regulations, economic fluctuations and a maze of rail infrastructure.

"Cira was the first time that a company could focus on a single project within a master plan, rather than attempting to do everything," Sweeney said of Amtrak's redevelopment approach. "The site Amtrak selected for development is between rail lines, so we avoided the need for major infrastructure work. We also took advantage of the opportunity Amtrak presented to establish a building with great connectivity to the station and one with scale to make an architectural statement."

Brandywine made a bold entry into the region's urban markets recently, adding Cira Centre (right) to Philadelphia's skyline. The project was the city's first new office tower in 12 years.

Brandywine has been aided by state-approved tax incentives for Cira Centre's tenants and by famed architect Cesar Pelli, whose design for the 28-story tower's glazed customized curtain wall system instantly redefines the character of University City.

In April, nearly nine months before Cira Centre's scheduled occupancy date, the 727,000-sq.-ft. building was 85 percent preleased. And there's talk of another office tower to follow.

"Cira Centre's success will result from the quality of the building and acceptance of the concept of using the 30th Street Station areas as a place to do business," Sweeney added. "That's something no one had tried before. Obviously, the time is right for it to happen."

Covering the waterfront

Cira Centre may also prove to be the best opportunity yet to spur the revitalization of the underused Schuylkill River region, a goal not unlike that of Brandywine's proposal for an ambitious mixed-use development called Founders Square along the Delaware River.

"We see our company playing a big role in the development of Philadelphia's waterfronts, which have never really been connected to the central business district," Sweeney said. He added that the mix of parks and high-end retail, residential, commercial and entertainment space would spur more horizontal development.

But while the $300 million proposal may be just what Philadelphia needs, Founders Square has been placed on hold due to a lack of public funding for infrastructure work. Sweeney remains optimistic that the project will move forward.

Brandywine historically established its base around Philadelphia, but is looking to be a dominant player downstream in Delaware. In Wilmington, the company owns One Christina Centre (pictured here) and is scheduled to begin construction on Two Christina Centre in 2006.

"The city decided that now is just not the time to do Founders Square, but we're hopeful that will change and we can get started in the next year," he said. "With the expansion of slot machines and other state-approved gaming activities, we may have the opportunity to include something along those lines as well."

Brandywine is also poised to take advantage of Delaware River development opportunities downstream in Wilmington. Two Christina Centre, which is the company's second collaboration with Cesar Pelli and due to begin construction in 2006, calls for a 500,000-sq.-ft. tower, parking and ground-floor retail to enhance the existing context of the Christina Gateway.

The Rubenstein deal also netted nearly 2 million sq. ft. of Class A Delaware office space for Brandywine, making it the First State's largest office landlord.

"Wilmington is simply a good place to do business," Sweeney said. "There are good schools, a good tax structure and a responsible local government that is genuinely concerned about preserving the area's quality of life."

Sweeney is also optimistic about Brandywine's third major market, Richmond, Va., the result of a 2001 property swap with Dallas-based Prentiss Properties. Brandywine is working with Ethyl Corp. to market and develop a mixed-use complex on a nine-acre downtown site adjacent to established business centers such as the Federal Reserve Bank of Richmond.

Currently in the master-planning stage, the site overlooking the James River will boast a variety of office, residential, retail and hotel uses.

A strong suburban focus

Despite Brandywine's fast start in the urban arena, Sweeney said the company remains firmly committed to suburban development. His examples include 2004's completion of two office buildings totaling 122,000 sq. ft. in Allentown, Pa., and Mt. Laurel, N.J., and the start of construction on a 78,000-sq.-ft. build-to-suit data center for AAA Mid-Atlantic in Mount Laurel.

Brandywine acquired several properties in the Richmond market through a 2001 swap with Dallas-based Prentiss Properties, including Two Paragon Place. The company is looking to further tap into the market, currently working with Ethyl Corp. to market and develop a mixed-use complex on a nine-acre downtown site.

Brandywine is eyeing several other suburban projects this year, including one in southern New Jersey and another closer to Princeton.

"Suburban development remains our core business," Sweeney added. "The Philadelphia area's suburban counties have met or exceeded national averages for growth over the past decade. The region is also economically diverse and driven in part by the presence of regional offices with limited users rather than the large-scale corporate headquarters. These conditions lend themselves to the real estate economies of scale in which we specialize."

Still, he said 2004's stellar performance may prove difficult to follow. "We actually view the markets as being a big challenge for the next several years," he added. "There is good job creation and space absorption, but both are well below historic levels. We're hopeful that the market will continue to work itself out of the doldrums and provide a better framework for the region's growth."

And while Sweeney said that other markets in the Boston-Richmond corridor offer appealing attributes, he is hesitant to name any specific areas for expanding Brandywine's reach.

"We want to manage what we have well and build out our existing land inventory," he added. "At the same time, we are always looking for ways to grow the company. We have purchased properties in other markets. If we find a good platform for growth, we'll go for it."

Sweeney said Brandywine will stick to the same pragmatic approach that enabled the company to grow the value of its portfolio from $5 million to $ 3 billion since its founding in 1994.

"Our major concern is quality growth," he added. "Our strategy has put us in a good position to make decisions based on opportunity and potential of performance, whether it's a suburban project or an urban infill property. We use a thoughtful approach that we hope will make it possible to double the company's size in the next three or four years."