UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2007

or

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

For the transition period from                      to                     

Commission file number		001-9106 (Brandywine Realty Trust)
		000-24407 (Brandywine Operating Partnership, L.P.)

Brandywine Realty Trust
Brandywine Operating Partnership, L.P.

(Exact name of registrant as specified in its charter)

MARYLAND (Brandywine Realty Trust)		23-2413352
DELAWARE (Brandywine Operating Partnership L.P.)		23-2862640
(State or other jurisdiction of
Incorporation or organization)		(I.R.S. Employer Identification No.)
555 East Lancaster Avenue
Radnor, Pennsylvania		19087
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code          (610) 325-5600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Brandywine Realty Trust		Yes þ No o
Brandywine Operating Partnership, L.P.		Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, or a non-accelerated filer. See definitions of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Brandywine Realty Trust		Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Brandywine Operating Partnership, L.P.		Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Brandywine Realty Trust		Yes o No þ
Brandywine Operating Partnership, L.P.		Yes o No þ

A total of 86,843,035 Common Shares of Beneficial Interest, par value $0.01 per share, were outstanding as of August 1, 2007.

 

 

TABLE OF CONTENTS

				Page
		PART I — FINANCIAL INFORMATION
		Brandywine Realty Trust
Item 1.		Financial Statements (unaudited)
		Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006			3
		Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2007 and 2006			4
		Consolidated Statements of Other Comprehensive Income for the three- and six-month periods ended June 30, 2007 and 2006			5
		Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2007 and June 30, 2006			6
		Notes to Unaudited Consolidated Financial Statements			7
		Brandywine Operating Partnership, L.P.
Item 1.		Financial Statements (unaudited)
		Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006			34
		Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2007 and 2006			35
		Consolidated Statements of Other Comprehensive Income for the three- and six-month periods ended June 30, 2007 and 2006			36
		Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2007 and June 30, 2006			37
		Notes to Unaudited Consolidated Financial Statements			38
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			64
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			83
Item 4.		Controls and Procedures			83
		PART II — OTHER INFORMATION
Item 1.		Legal Proceedings			84
Item 1A.		Risk Factors			84
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			84
Item 3.		Defaults Upon Senior Securities			84
Item 4.		Submission of Matters to a Vote of Security Holders			84
Item 5.		Other Information			84
Item 6.		Exhibits			85
		Signatures			86
COMPUTATION OF EARNINGS BRANDYWINE REALTY TRUST
COMPUTATION OF EARNINGS BRANDYWINE OPERATING PARTNERSHIP
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
CERTIFICATION OF VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICEER
CERTIFICATION OF VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER -- SECTION 906
CERTIFICATION OF VICE PRESIDENT AND CHIEF FINANCIAL OFFICER -- SECTION 906
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER -- SECTION 906
CERTIFICATION OF VICE PRESIDENT AND CHIEF FINANCIAL OFFICER -- SECTION 906

Filing Format

This combined Form 10-Q is being filed separately by Brandywine Realty Trust and Brandywine Operating Partnership, L.P.

PART I — FINANCIAL INFORMATION

Item 1. — Financial Statements

BRANDYWINE REALTY TRUST

		June 30,				December 31,
		2007				2006
ASSETS
Real estate investments:
Operating properties		$	4,862,726			$	4,927,305
Accumulated depreciation			(554,417	)			(515,698	)
Operating real estate investments, net			4,308,309				4,411,607
Development land and construction-in-progress			373,497				328,119
Total real estate invesmtents, net			4,681,806				4,739,726
Cash and cash equivalents			28,522				25,379
Cash escrowed with qualified intermediary (Note 3)			36,590				—
Accounts receivable, net (Note 2)			16,972				19,957
Accrued rent receivable, net			77,922				71,589
Asset held for sale, net			—				126,016
Investment in real estate ventures, at equity (Note 4)			72,748				74,574
Deferred costs, net (Note 5)			81,823				73,708
Intangible assets, net (Note 6)			239,469				281,251
Other assets			92,221				96,818
Total assets		$	5,328,073			$	5,509,018
LIABILITIES AND BENEFICIARIES’ EQUITY
Mortgage notes payable (Note 7)		$	757,145			$	883,920
Unsecured notes, net of discounts (Note 7)			2,208,070				2,208,310
Unsecured credit facility (Note 7)			210,000				60,000
Accounts payable and accrued expenses			79,473				108,400
Distributions payable			42,131				42,760
Tenant security deposits and deferred rents			59,429				55,697
Acquired below market leases, net (Note 6)			72,259				92,527
Other liabilities			12,682				14,661
Mortgage notes payable and other liabilities held for sale			—				20,826
Total liabilities			3,441,189				3,487,101
Minority interest — partners’ share of consolidated real estate ventures (Note 10)			—				34,428
Minority interest — LP units (Note 10)			85,829				89,563
Commitments and contingencies (Note 14 )
Beneficiaries’ equity (Note 11):
Preferred Shares (shares authorized-20,000,000):
7.50% Series C Preferred Shares, $0.01 par value; issued and outstanding- 2,000,000 in 2007 and 2006			20				20
7.375% Series D Preferred Shares, $0.01 par value; issued and outstanding- 2,300,000 in 2007 and 2006			23				23
Common Shares of beneficial interest, $0.01 par value; shares authorized 200,000,000; issued and outstanding- 87,049,237 in 2007 and 88,327,041 in 2006			872				883
Additional paid-in capital			2,275,319				2,311,541
Cumulative earnings			444,340				423,764
Accumulated other comprehensive income			1,322				1,576
Cumulative distributions			(920,841	)			(839,881	)
Total beneficiaries’ equity			1,801,055				1,897,926
Total liabilities, minority interest and beneficiaries’ equity		$	5,328,073			$	5,509,018

The accompanying notes are an integral part of these consolidated financial statements.

BRANDYWINE REALTY TRUST

		For the three-month periods								For the six-month periods
		ended June 30,								ended June 30,
		2007				2006				2007				2006
Revenue:
Rents		$	138,597			$	130,467			$	276,537			$	253,536
Tenant reimbursements			21,016				15,496				41,839				32,130
Other			4,691				4,466				9,029				8,681
Total revenue			164,304				150,429				327,405				294,347
Operating Expenses:
Property operating expenses			45,965				41,504				91,170				82,478
Real estate taxes			16,435				14,388				32,462				28,595
Depreciation and amortization			58,227				64,145				120,274				115,357
Administrative expenses			6,993				7,724				14,262				16,214
Total operating expenses			127,620				127,761				258,168				242,644
Operating income			36,684				22,668				69,237				51,703
Other Income (Expense):
Interest income			1,603				2,573				2,390				5,223
Interest expense			(40,803	)			(41,596	)			(81,161	)			(81,974	)
Interest expense — Deferred financing costs			(1,065	)			(794	)			(2,323	)			(1,273	)
Equity in income of real estate ventures			4,504				463				5,258				1,428
Net gain on sale of interests in real estate			—				2,608				—				2,608
Income (loss) before minority interest			923				(14,078	)			(6,599	)			(22,285	)
Minority interest — partners’ share of consolidated real estate ventures			8				(17	)			(108	)			281
Minority interest attributable to continuing operations — LP units			46				707				457				1,142
Income (loss) from continuing operations			977				(13,388	)			(6,250	)			(20,862	)
Discontinued operations:
Income from discontinued operations			1,093				2,119				2,869				7,365
Net (loss) gain on disposition of discontinued operations			(856	)			—				25,153				—
Minority interest — partners’ share of consolidated real estate ventures			—				(195	)			—				(382	)
Minority interest attributable to discontinued operations — LP units			(10	)			(92	)			(1,196	)			(319	)
Income from discontinued operations			227				1,832				26,826				6,664
Net income (loss)			1,204				(11,556	)			20,576				(14,198	)
Income allocated to Preferred Shares			(1,998	)			(1,998	)			(3,996	)			(3,996	)
Income (loss) allocated to Common Shares		$	(794	)		$	(13,554	)		$	16,580			$	(18,194	)
Basic earnings (loss) per Common Share:
Continuing operations		$	(0.01	)		$	(0.17	)		$	(0.12	)		$	(0.28	)
Discontinued operations			0.00				0.02				0.31				0.07
		$	(0.01	)		$	(0.15	)		$	0.19			$	(0.20	)
Diluted earnings (loss) per Common Share:
Continuing operations		$	(0.01	)		$	(0.17	)		$	(0.12	)		$	(0.28	)
Discontinued operations			0.00				0.02				0.30				0.07
		$	(0.01	)		$	(0.15	)		$	0.19			$	(0.20	)
Dividends declared per Common Share		$	0.44			$	0.44			$	0.88			$	0.88
Basic weighted average shares outstanding			87,080,785				90,540,237				87,680,773				89,923,528
Diluted weighted average shares outstanding			87,080,785				90,540,237				88,298,521				89,923,528

The accompanying notes are an integral part of these consolidated financial statements.

BRANDYWINE REALTY TRUST

		For the three-month periods								For the six-month periods
		ended June 30,								ended June 30,
		2007				2006				2007				2006
Net income (loss)		$	1,204			$	(11,556	)		$	20,576			$	(14,198	)
Other comprehensive income:
Unrealized gain (loss) on derivative financial instruments			(1,872	)			605				(422	)			2,363
Less: minority interest — consolidated real estate venture partner’s share of unrealized gain (loss) on derivative financial instruments			—				(296	)			—				(809	)
Settlement of forward starting swaps			1,148				—				1,148				3,266
Reclassification of realized (gains)/losses on derivative financial instruments to operations, net			(394	)			9				(385	)			105
Unrealized gain (loss) on available-for-sale securities			13				(184	)			(595	)			(776	)
Total other comprehensive income (loss)			(1,105	)			134				(254	)			4,149
Comprehensive income (loss)		$	99			$	(11,422	)		$	20,322			$	(10,049	)

The accompanying notes are an integral part of these consolidated financial statements.

BRANDYWINE REALTY TRUST

		Six-month periods
		ended June 30,
		2007				2006
Cash flows from operating activities:
Net income (loss)		$	20,576			$	(14,198	)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation			90,405				95,051
Amortization:
Deferred financing costs			2,323				1,274
Deferred leasing costs			7,731				5,184
Acquired above (below) market leases, net			(6,304	)			(3,907	)
Acquired lease intangibles			26,700				33,700
Deferred compensation costs			2,559				1,445
Straight-line rent			(14,775	)			(15,916	)
Provision for doubtful accounts			500				1,956
Real estate venture income in excess of distributions			(104	)			(267	)
Net gain on sale of interests in real estate			(25,153	)			(2,608	)
Minority interest (expense)/income			847				(722	)
Changes in assets and liabilities:
Accounts receivable			3,916				5,937
Other assets			1,366				6,471
Accounts payable and accrued expenses			(6,151	)			7,451
Tenant security deposits and deferred rents			5,665				9,976
Other liabilities			(10,148	)			(6,053	)
Net cash from operating activities			99,953				124,774
Cash flows from investing activities:
Acquisition of Prentiss			—				(935,856	)
Acquisition of properties			—				(50,114	)
Acquisition of minority interest — partners’ share of consolidated real estate venture			(64,174	)			—
Sales of properties, net			222,592				144,006
Capital expenditures			(133,264	)			(102,851	)
Investment in unconsolidated real estate ventures			(523	)			(502	)
Cash distributions from unconsolidated real estate ventures in excess of equity in income			2,169				2,215
Leasing costs			(11,499	)			(12,114	)
Net cash from investing activities			15,301				(955,216	)
Cash flows from financing activities:
Proceeds from Credit Facility borrowings			620,875				310,000
Repayments of Credit Facility borrowings			(470,875	)			(205,000	)
Proceeds from mortgage notes payable			—				20,520
Repayments of mortgage notes payable			(126,780	)			(21,198	)
Proceeds from term loan			—				750,000
Repayments of term loan			—				(750,000	)
Proceeds from unsecured notes			299,644				847,818
Repayments of unsecured notes			(299,866	)			—
Proceeds from forward starting swap termination			1,148				3,266
Repayments on employee stock loans			—				35
Debt financing costs			(3,776	)			(6,987	)
Exercise of stock options			6,221				8,011
Repurchases of Common Shares			(53,524	)			(34,481	)
Distributions paid to shareholders			(81,716	)			(68,306	)
Distributions to minority interest holders			(3,462	)			(4,033	)
Net cash from financing activities			(112,111	)			849,645
Increase (decrease) in cash and cash equivalents			3,143				19,203
Cash and cash equivalents at beginning of period			25,379				7,174
Cash and cash equivalents at end of period		$	28,522			$	26,377
Supplemental disclosure:
Cash paid for interest, net of capitalized interest of $8,217 in 2007 and $4,916 in 2006		$	92,541			$	73,933
Supplemental disclosure of non-cash activity:
Common shares issued in the Prentiss acquisition			—				1,022,173
Operating Partnership units issued in Prentiss acquisitions			—				64,103
Operating Partnership units issued in property acquistions			—				13,819
Cash escrowed with qualified intermediary (Note 3)			109,102				—
Acquisition of property using cash escrowed with qualified intermediary			(72,511	)			—
Debt, minority interest and other liabilities, net, assumed in the Prentiss acquisition			—				679,520

The accompanying notes are an integral part of these consolidated financial statements.

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

1. THE COMPANY

Brandywine Realty Trust, a Maryland real estate investment trust (“REIT”), is a self-administered and self-managed real estate investment trust active in acquiring, developing, redeveloping, leasing and managing office and industrial properties. Brandywine Realty Trust owns its assets and conducts its operations through Brandywine Operating Partnership, L.P. a Delaware limited partnership (the “Operating Partnership”) and subsidiaries of the Operating Partnership. Brandywine Realty Trust, the Operating Partnership and their consolidated subsidiaries are collectively referred to below as the “Company.” The Company’s common shares of beneficial interest are publicly traded on the New York Stock Exchange under the ticker symbol “BDN”.

As of June 30, 2007, the Company owned 238 office properties, 23 industrial facilities and one mixed-use property (collectively, the “Properties”) containing an aggregate of approximately 25.7 million net rentable square feet. The Company also has six properties under development and 10 properties under redevelopment containing an aggregate 2.4 million net rentable square feet. As of June 30, 2007, the Company consolidates three office properties owned by real estate ventures containing 0.4 million net rentable square feet. Therefore, the Company consolidates 281 properties with an aggregate of 28.5 million net rentable square feet. As of June 30, 2007, the Company owned economic interests in 12 unconsolidated real estate ventures that contain approximately 2.8 million net rentable square feet (collectively, the “Real Estate Ventures”). The Properties and the properties owned by the Real Estate Ventures are located in and surrounding Philadelphia, PA, Wilmington, DE, Southern and Central New Jersey, Richmond, VA, Metropolitan Washington, D.C., Austin, TX and Oakland and San Diego, CA.

Brandywine Realty Trust is the sole general partner of the Operating Partnership and, as of June 30, 2007, owned a 95.7% interest in the Operating Partnership. The Company conducts its third-party real estate management services business primarily through four management companies (collectively, the “Management Companies”): Brandywine Realty Services Corporation (“BRSCO”), BTRS, Inc. (“BTRS”), Brandywine Properties I Limited, Inc. (“BPI”) and Brandywine Properties Management, L.P. (“BPM”). Each of BRSCO, BTRS and BPI is a taxable REIT subsidiary. The Operating Partnership owns a 95% interest in BRSCO and the remaining 5% interest is owned by a partnership comprised of a current executive and former executive of the Company, each of whom is a member of the Company’s Board of Trustees. The Operating Partnership owns, directly and indirectly, 100% of each of BTRS, BPI and BPM.

As of June 30, 2007 the Management Companies were managing properties containing an aggregate of approximately 42.1 million net rentable square feet, of which approximately 28.1 million net rentable square feet related to Properties owned by the Partnership and approximately 14.0 million net rentable square feet related to properties owned by third parties and certain Real Estate Ventures. Unless otherwise indicated, all references to square feet represent net rentable area.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared by the Company without audit except as to the balance sheet as of December 31, 2006, which has been derived from audited data, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the included disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting solely of normal recurring matters) for a fair statement of the financial position of the Company as of June 30, 2007, the results of its operations for the three- and six-month periods ended June 30, 2007 and 2006 and its cash flows for the six-month periods ended June 30, 2007 and 2006 have been included. The results of operations for such interim periods are not necessarily indicative of the results for a full year. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and footnotes

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

included in the Company’s 2006 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to conform to the current period presentation.

Principles of Consolidation

When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if the Company is deemed to be the primary beneficiary, in accordance with FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). When an entity is not deemed to be a VIE, the Company considers the provisions of EITF 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”). The Company consolidates (i) entities that are VIEs and of which the Company is deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company controls and the limited partners do not have the ability to dissolve the entity or remove the Company without cause nor substantive participating rights. Entities that the Company accounts for under the equity method (i.e. at cost, increased or decreased by the Company’s share of earnings or losses, less distributions) include (i) entities that are VIEs and of which the Company is not deemed to be the primary beneficiary (ii) entities that are non-VIEs which the Company does not control, but over which the Company has the ability to exercise significant influence and (iii) entities that are non-VIE’s that the Company controls through its general partner status, but the limited partners in the entity have the substantive ability to dissolve the entity or remove the Company without cause or have substantive participating rights. The Company will reconsider its determination of whether an entity is a VIE and who the primary beneficiary is, and whether or not the limited partners in an entity have substantive rights, if certain events occur that are likely to cause a change in the original determinations. The portion of these entities not owned by the Company is presented as minority interest as of and during the periods consolidated. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue, impairment of long-lived assets, allowance for doubtful accounts and deferred costs.

Operating Properties

Operating properties are carried at historical cost less accumulated depreciation and impairment losses when applicable. The cost of operating properties reflects their purchase price or development cost. Costs incurred for the acquisition and renovation of an operating property are capitalized to the Company’s investment in that property. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.

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-cancelable term of the lease. Capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. Capitalized below-market lease values are amortized as an

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

increase to rental income over the remaining non-cancelable terms of the respective leases, including any fixed-rate renewal periods.

Other intangible assets also include amounts representing the value of 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. The Company estimates the cost to execute leases with terms similar to the remaining lease terms of the in-place leases, including leasing commissions, legal and other 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 or by using independent appraisals. Factors considered by the Company in this analysis include an estimate of the carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which primarily range from three to twelve months. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. The Company also uses the information obtained as a result of its pre-acquisition due diligence as part of its consideration of FIN 47, and when necessary, will record a conditional asset retirement obligation as part of its purchase price.

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 expected 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-cancelable 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 in-place lease values and tenant relationship values would be charged to expense and market rate adjustments would be recorded to revenue.

Revenue Recognition

Rental revenue is recognized on the straight-line basis from the later of the date of the commencement of the lease or the date of acquisition of the property subject to existing leases, which averages minimum rents over the terms of the leases. The cumulative difference between lease revenue recognized under this method and contractual lease payment terms is recorded as “accrued rent receivable” on the accompanying balance sheets. This straight-line rent adjustment increased revenue by approximately $5.6 million and $12.6 million for the three- and six-month periods ended June 30, 2007 and approximately $8.1 million and $15.9 million for the three- and six-month periods ended June 30, 2006. Deferred rents on the balance sheet represent rental revenue received prior to their due dates and tenant reimbursements of certain leasehold improvements that will remain the Company’s property at the end of the tenant’s lease term. The amortization of the leasehold improvement reimbursement is calculated on a straight-line basis over the term of the tenant’s lease and is a component of straight-line rental income and increased revenue by $0.5 million and $2.1 million for the three- and six-month periods ended June 30, 2007 and approximately $0.1 million for the three- and six-month periods ended June 30, 2006. Leases also typically provide for tenant reimbursement of a portion of common area maintenance and other operating expenses to the extent that a tenant’s pro rata share of expenses exceeds a base year level set in the lease.

Tenant receivables and accrued rent receivables are carried net of the allowances for doubtful accounts of $7.5 million as of June 30, 2007 and $9.3 million as of December 31, 2006. The allowance is based on management’s evaluation of the collectability of receivables, taking into account tenant specific considerations as well as the overall credit of the tenant portfolio. Other income is recorded when earned and is primarily comprised of third party leasing commissions, third party management fees, termination fees received from tenants and bankruptcy settlement fees. Other income includes termination fees of $0.5 million and $1.8 million for the three- and six-month periods ended June 30, 2007 and $1.3 million and $1.9 million for the three- and six-month periods ended June 30, 2006.

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

Stock-Based Compensation Plans

The Company maintains shareholder-approved equity incentive plans. The Compensation Committee of the Company’s Board of Trustees authorizes awards under these plans. In May 2007, the Company’s shareholders approved an amendment to the Company’s Amended and Restated 1997 Long-Term Incentive Plan (the “1997 Plan”). The amendment provided for the merger of the Prentiss Properties Trust 2005 Share Incentive Plan (the “Prentiss 2005 Plan”) with and into the 1997 Plan, thereby transferring into the 1997 Plan all of the shares that remained available for award under the Prentiss 2005 Plan. The Company had previously assumed the Prentiss 2005 Plan, together with other Prentiss incentive plans, as part of the Company’s January 2006 acquisition of Prentiss. The 1997 Plan reserves 500,000 common shares solely for awards under options and share appreciation rights that have an exercise or strike price at least equal to the market price of the common shares on the date of award and the remaining shares under the 1997 Plan are available for any type of award, including restricted share and performance share awards and options. Incentive stock options may not be granted with an exercise price that is lower than the market price of the common shares on the grant date. All options awarded by the Company to date are non-qualified stock options that generally had an initial vesting schedule that ranged from two to ten years. As of June 30, 2007, approximately 4.1 million common shares remained available for future award under the 1997 Plan (including the 500,000 shares that are limited to option awards as described above, and without giving effect to any shares that would become available for awards if and to the extent that outstanding awards lapse, expire or are forfeited).

On January 1, 2002, the Company began to expense the fair value of stock-based compensation awards granted subsequent to January 1, 2002 over the applicable vesting period as a component of general and administrative expenses in the Company’s consolidated Statements of Operations. The Company recognized stock-based compensation expense of $1.3 million and $2.6 million during the three- and six-month periods ended June 30, 2007 and $0.7 million and $1.4 million during the three- and six-month periods ended June 30, 2006, respectively.

Accounting for Derivative Instruments and Hedging Activities

The Company accounts for its derivative instruments and hedging activities under SFAS No. 133 (“SFAS 133”), Accounting for Derivative Instruments and Hedging Activities, and its corresponding amendments under SFAS No. 138, Accounting for Certain Derivative Instruments and Hedging Activities – An Amendment of SFAS 133. SFAS 133 requires the Company to measure every derivative instrument (including certain derivative instruments embedded in other contracts) at fair value and record them in the balance sheet as either an asset or liability. For derivatives designated as fair value hedges, the changes in fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in the fair value of the derivative are reported in other comprehensive income. Changes in fair value of derivative instruments and ineffective portions of hedges are recognized in earnings in the current period. For the three-month and six-month periods ended June 30, 2007 and 2006, the Company was not party to any derivative contract designated as a fair value hedge and there are no ineffective portions of our cash flow hedges.

The Company actively manages its ratio of fixed-to-floating rate debt. To manage its fixed and floating rate debt in a cost-effective manner, the Company, from time to time, may enter into interest rate swap agreements as cash flow hedges, under which it agrees to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts. As of June 30, 2007, there were no agreements in place.

Income Taxes

Brandywine Realty Trust has elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, Brandywine Realty Trust has several subsidiary REITs. In order to maintain their qualification as REITs, Brandywine Realty Trust and each of its REIT subsidiaries are required to, among other things, distribute at least 90% of their REIT taxable income to its stockholders and meet certain tests regarding the nature of its income and assets. As REITs, Brandywine Realty Trust and its REIT subsidiaries are not subject to federal income tax with respect to the portion of its income that meets certain criteria and is distributed

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

annually to the stockholders. Accordingly, no provision for federal income taxes is included in the accompanying consolidated financial statements with respect to the operations of these operations. Brandywine Realty Trust and its REIT subsidiaries intend to continue to operate in a manner that allows them to continue to meet the requirements for taxation as REITs. Many of these requirements, however, are highly technical and complex. If Brandywine Realty Trust or one of its REIT subsidiaries were to fail to meet these requirements, Brandywine Realty Trust would be subject to federal income tax. Brandywine Realty Trust is subject to certain state and local taxes. Provision for such taxes has been included in general and administrative expenses in Brandywine Realty Trust’s Consolidated Statements of Operations and Comprehensive Income.

Brandywine Realty Trust may elect to treat one or more of its subsidiaries as a taxable REIT subsidiary (“TRS”). In general, a TRS of Brandywine Realty Trust may perform additional services for tenants of Brandywine Realty Trust and generally may engage in any real estate or non-real estate related business. A TRS is subject to corporate federal income tax. Brandywine Realty Trust has elected to treat certain of its corporate subsidiaries as TRSs, these entities provide third party property management services and certain services to tenants that could not otherwise be provided.

New Pronouncements

In June 2007, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies” (“SOP 07-1”). SOP 07-1 addresses when the accounting principles of the AICPA Audit and Accounting Guide “Investment Companies” must be applied by an entity and whether investment company accounting must be retained by a parent company in consolidation or by an investor in the application of the equity method of accounting. In addition, SOP 07-1 includes certain disclosure requirements for parent companies and equity method investors in investment companies that retain investment company accounting in the parent company’s consolidated financial statements or the financial statements of an equity method investor. SOP 07-1 is effective for the fiscal year beginning January 1, 2008. The Company has determined that it is not an investment company under the provisions of SOP 07-1 and does not expect to retain specialized investment company accounting for any of its consolidated or equity method investments where the investment entity may be deemed an investment company. Accordingly, the Company does not expect the adoption of SOP 07-1 to have a material impact on its financial position and results of operations.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), which gives entities the option to measure eligible financial assets, financial liabilities and firm commitments at fair value on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a firm commitment. Subsequent changes (i.e., unrealized gains and losses) in fair value must be recorded in earnings. Additionally, SFAS 159 allows for a one-time election for existing positions upon adoption, with the transition adjustment recorded to beginning retained earnings. This Statement is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the potential impact that the adoption of SFAS 159 will have on its financial position and results of operations.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS No. 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 applies whenever other standards require assets or liabilities to be measured at fair value. SFAS No. 157 also provides for certain disclosure requirements, including, but not limited to, the valuation techniques used to measure fair value and a discussion of changes in valuation techniques, if any, during the period. This statement is effective in fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact and believes that the adoption of this standard on January 1, 2008 will not have a material effect on its financial position and results of operations.

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on description, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized no material adjustments regarding its tax accounting treatment. The Company expects to recognize interest and penalties, to the extent incurred related to uncertain tax positions, if any, as income tax expense, which would be included in general and administrative expense.

3. REAL ESTATE INVESTMENTS

As of June 30, 2007 and December 31, 2006, the gross carrying value of the Company’s operating properties was as follows (amounts in thousands):

		June 30, 2007				December 31, 2006
Land		$	738,193			$	756,400
Building and improvements			3,725,268				3,807,040
Tenant improvements			399,265				363,865
		$	4,862,726			$	4,927,305

Acquisitions and Dispositions

The Company’s acquisitions are accounted for by the purchase method. The results of each acquired property are included in the Company’s results of operations from their respective purchase dates.

2007

On January 18, 2007, the Company sold Norriton Office Center, an office property located in East Norriton, Pennsylvania containing 73,394 net rentable square feet, for a sales price of $7.8 million.

On January 19, 2007, the Company sold four office properties located in Dallas, Texas containing 1,091,186 net rentable square feet and a 4.7 acre land parcel, for an aggregate sales price of $107.1 million.

On January 31, 2007, the Company sold George Kachel Farmhouse, an office property located in Reading, Pennsylvania containing 1,664 net rentable square feet, for a sales price of $0.2 million.

On March 1, 2007, the Company acquired the remaining 49% interest in a consolidated real estate venture previously owned by Stichting Pensioenfonds ABP containing ten office properties for a purchase price of $63.7 million. The Company owned a 51% interest in this real estate venture through the acquisition of Prentiss in January 5, 2006 and had already consolidated this venture. This purchase was accounted for as a step acquisition and the difference between the purchase price of the minority interest and the carrying value of the pro rata share of the assets of the real estate venture was allocated to the real estate venture’s assets and liabilities based on their relative fair value.

On March 30, 2007, the Company sold 1007 Laurel Oak, an office property located in Voorhees, New Jersey containing 78,205 net rentable square feet, for a sales price of $7.0 million.

On March 30, 2007, the Company sold 10 office properties located in Reading and Harrisburg, Pennsylvania containing 940,486 net rentable square feet, for an aggregate sales price of $112.0. The Company structured this transaction to qualify as a like-kind exchange under Section 1031 of the Code and the cash from the sale was held by a qualified intermediary for purposes of accomplishing the like-kind exchange.

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

On April 30, 2007, the Company sold Cityplace Center, an office property located Dallas, Texas containing 1,295,832 net rentable square feet, for an aggregate sales price of $115.0 million.

On May 10, 2007, the Company acquired Lake Merritt Tower, an office property located in Oakland, California containing 204,278 net rentable square feet for an aggregate contracted purchase price of $72.0 million (not including closing costs of $0.5 million). A portion of the proceeds from the sale of the 10 office properties located in Reading and Harrisburg, Pennsylvania in March 2007 was used to fully fund this purchase.

2006

Prentiss Acquisition

On January 5, 2006, the Company acquired Prentiss pursuant to the Merger Agreement that the Company entered into with Prentiss on October 3, 2005. In conjunction with the Company’s acquisition of Prentiss, designees of The Prudential Insurance Company of America (“Prudential”) acquired certain of Prentiss’ properties that contain an aggregate of approximately 4.32 million net rentable square feet for a total consideration of approximately $747.7 million. Through its acquisition of Prentiss (and after giving effect to the Prudential acquisition of Prentiss’ properties), the Company acquired a portfolio of 79 office properties (including 13 properties that were owned by consolidated Real Estate Ventures and seven properties that were owned by an unconsolidated Real Estate Venture) that contain an aggregate of 14.0 million net rentable square feet. The results of the operations of Prentiss have been included in the Company’s consolidated financial statements since January 5, 2006.

The Company funded the approximately $1.05 billion cash portion of the merger consideration, related transaction costs and prepayments of approximately $543.3 million in Prentiss mortgage debt at the closing of the merger through (i) a $750 million unsecured term loan; (ii) approximately $676.5 million of cash from Prudential’s acquisition of the Prentiss properties; and (iii) approximately $195.0 million through borrowing under a revolving credit facility.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition of Prentiss (in thousands):

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

		At January 5, 2006
Real estate investments
Land — operating		$	282,584
Building and improvements			1,942,728
Tenant improvements			120,610
Construction in progress and land inventory			57,329
Total real estate investments acquired			2,403,251
Rent receivables			6,031
Other assets acquired:
Intangible assets:
In-place leases			187,907
Relationship values			98,382
Above-market leases			26,352
Total intangible assets acquired			312,641
Investment in real estate ventures			66,921
Investment in marketable securities			193,089
Other assets			8,868
Total other assets			581,519
Total assets acquired			2,990,801
Liabilities assumed:
Mortgage notes payable			532,607
Unsecured notes			78,610
Secured note payable			186,116
Security deposits and deferred rent			6,475
Other liabilities:
Below-market leases			78,911
Other liabilities			43,995
Total other liabilities assumed			122,906
Total liabilities assumed			926,714
Minority interest			104,658
Net assets acquired		$	1,959,429

In the acquisition of Prentiss, each then outstanding Prentiss common share was converted into the right to receive 0.69 of a Brandywine common share and $21.50 in cash (the “Per Share Merger Consideration”) except that 497,884 Prentiss common shares held in the Prentiss Deferred Compensation Plan converted solely into 720,737 Brandywine common shares. In addition, each then outstanding unit (each, a “Prentiss OP Unit”) of limited partnership interest in the Prentiss operating partnership subsidiary was, at the option of the holder, converted into Prentiss Common Shares with the right to receive the Per Share Merger Consideration or 1.3799 Class A Units of the Operating Partnership (“Brandywine Class A Units”). Accordingly, based on 49,375,723 Prentiss common shares outstanding and 139,000 Prentiss OP Units electing to receive merger consideration at closing of the acquisition, the Company issued 34,541,946 Brandywine common shares and paid an aggregate of approximately $1.05 billion in cash to the accounts of the former Prentiss shareholders. Based on 1,572,612 Prentiss OP Units outstanding at closing of the acquisition that did not elect to receive merger consideration, the Operating Partnership issued 2,170,047 Brandywine Class A Units. In addition, options issued by Prentiss that were exercisable for an aggregate of 342,662 Prentiss common shares were converted into options exercisable for an aggregate of 496,037 Brandywine common shares at a weighted average exercise price of $22.00 per share. Through its acquisition of Prentiss the Company also assumed approximately $611.2 million in aggregate principal amount of Prentiss debt.

Each Brandywine Class A Unit that was issued in the merger is subject to redemption at the option of the holder. The Operating Partnership may, at its option, satisfy the redemption either for an amount, per unit, of cash equal to the then market price of one Brandywine common share (based on the prior ten-day trading average) or for one Brandywine common share.

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

For purposes of computing the total purchase price reflected in the financial statements, the Brandywine common shares (including restricted common shares), operating partnership units and options that were issued in the Prentiss transaction were valued based on the average trading price per Brandywine common share of $29.54. The average trading price was based on the average of the high and low trading prices for each of the two trading days before, the day of and the two trading days after the merger was announced (i.e., September 29, September 30, October 3, October 4 and October 5).

The Company considered the provisions of FIN 47 for these acquisitions and, where necessary, recorded a conditional asset retirement obligation as part of the purchase price. The aggregate asset retirement recorded in connection with the Prentiss acquisition was approximately $2.7 million.

Pro forma information relating to the acquisition of Prentiss is presented below as if Prentiss was acquired and the related financing transactions occurred on January 1, 2006. There are no pro forma amounts presented for the three-month period ended June 30, 2006 as the pro forma adjustments reflected represent activity for the first 4 days of 2006. These pro forma results are not necessarily indicative of the results which actually would have occurred if the acquisition had occurred on the first day of the period presented, nor does the pro forma financial information purport to represent the results of operations for future periods (in thousands, except per share amounts):

		Six-month period
		ended June 30, 2006
Pro forma revenue		$	296,765
Pro forma loss from continuing operations			(21,119	)
Pro forma loss allocated to common shares			(17,901	)
Earnings per common share from continuing operations
Basic — as reported		$	(0.28	)
Basic — as pro forma		$	(0.28	)
Diluted — as reported		$	(0.28	)
Diluted — as pro forma		$	(0.28	)
Earnings per common share
Basic — as reported		$	(0.20	)
Basic — as pro forma		$	(0.20	)
Diluted — as reported		$	(0.20	)
Diluted — as pro forma		$	(0.20	)

Subsequent to its acquisition of Prentiss and the related sale of certain properties to Prudential, the Company sold nine of the acquired properties that contained an aggregate of 1.7 million net rentable square feet during the six-month period ended June 30, 2006.

During the six-months ended June 30, 2007, the Company sold five of the acquired properties that contained an aggregate of 2.4 million net rentable square feet and a 4.7 acre parcel of land.

Since January 5, 2006, the Company has sold a total of 22 of the acquired properties that contained an aggregate of 5.3 million net rentable square feet and two parcels of land totaling 15.6 acres.

Other 2006 Acquisitions and Dispositions

In addition to the acquisition and disposition activity related to Prentiss, during the six-month period ended June 30, 2006, the Company did the following:

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

On February 1, 2006, the Company acquired 101 Lenox Drive, an office property located in Lawrenceville, New Jersey containing 92,980 net rentable square feet, for a purchase price of $10.2 million.

On April 4, 2006, the Company acquired One Paragon Place, an office property located in Richmond, Virginia containing 145,127 net rentable square feet, for a purchase price of $24.0 million.

On April 17, 2006, the Company acquired a parcel of land located in Mount Laurel, New Jersey containing 47.9 acres for a purchase price of $6.7 million.

On April 20, 2006, the Company sold a parcel of land located in Radnor, Pennsylvania containing 1.3 acres for a sales price of $4.5 million.

On April 21, 2006, the Company acquired a parcel of land located in Newtown, Pennsylvania containing 5.5 acres for a purchased price of $1.9 million.

On June 21, 2006, the Company sold a parcel of land located in Westampton, New Jersey containing 5.5 acres for a sales price of $0.4 million.

On June 27, 2006, the Company acquired a parcel of land located in Goochland County, Virginia containing 23.2 acres for a purchase price of $4.6 million.

4. INVESTMENT IN UNCONSOLIDATED VENTURES

As of June 30, 2007, the Company had an aggregate investment of approximately $72.7 million in 12 unconsolidated Real Estate Ventures (net of returns of investment). The Company formed these ventures with unaffiliated third parties, or acquired them, to develop office properties or to acquire land in anticipation of possible development of office properties. Ten of the Real Estate Ventures own 15 office buildings that contain an aggregate of approximately 2.8 million net rentable square feet, one Real Estate Venture developed a hotel property that contains 137 rooms and one Real Estate Venture is developing an office property located in Albemarle County, VA.

The Company accounts for its unconsolidated interests in its Real Estate Ventures using the equity method. Unconsolidated interests range from 6% to 50%, subject to specified priority allocations in certain of the Real Estate Ventures.

The amounts reflected below (except for Company’s share of equity and income) are based on the historical financial information of the individual Real Estate Ventures. One of the Real Estate Ventures, acquired in connection with the Prentiss acquisition, had a negative equity balance on a historical cost basis as a result of historical depreciation and distributions of excess financing proceeds. The Company reflected its acquisition of this Real Estate Venture interest at its relative fair value as of the date of the purchase of Prentiss. The difference between allocated cost and the underlying equity in the net assets of the investee is accounted for as if the entity were consolidated (i.e., allocated to the Company’s relative share of assets and liabilities with an adjustment to recognize equity in earnings for the appropriate additional depreciation/amortization).

The following is a summary of the financial position of the Real Estate Ventures as of June 30, 2007 and December 31, 2006 (in thousands):

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

		June 30,				December 31,
		2007				2006
Operating property, net of accumulated depreciation		$	394,539			$	365,168
Other assets			45,039				52,935
Liabilities			32,111				28,764
Debt			357,661				332,589
Equity			49,805				56,888
Company’s share of equity (Company’s basis)			72,748				74,574

The following is a summary of results of operations of the Real Estate Ventures for the three- and six-month periods ended June 30, 2007 and 2006 (in thousands):

		Three-month periods								Six-month periods
		ended June 30,								ended June 30,
		2007				2006				2007				2006
Revenue		$	18,986			$	18,710			$	37,300			$	38,434
Operating expenses			6,643				6,743				12,940				14,737
Interest expense, net			5,410				5,080				10,648				10,074
Depreciation and amortization			3,776				5,299				8,004				10,172
Net income			3,156				1,589				5,707				3,451
Company’s share of income (Company basis)			896				463				1,658				1,428

Equity in income of real estate ventures in the Company’s consolidated statement of operations for the three- and six- months ended June 30, 2007 includes a $3.8 million distribution of a residual profits interest that is not included in the table above.

As of June 30, 2007, the Company had guaranteed repayment of approximately $0.6 million of loans for the Real Estate Ventures. The Company also provides customary environmental indemnities and completion guarantees in connection with construction and permanent financing both for its own account and on behalf of the Real Estate Ventures.

5. DEFERRED COSTS

As of June 30, 2007 and December 31, 2006, the Company’s deferred costs were comprised of the following (in thousands):

		June 30, 2007
						Accumulated				Deferred Costs,
		Total Cost				Amortization				net
Leasing Costs		$	91,984			$	(30,941	)		$	61,043
Financing Costs			26,898				(6,118	)			20,780
Total		$	118,882			$	(37,059	)		$	81,823

		December 31, 2006
						Accumulated				Deferred Costs,
		Total Cost				Amortization				net
Leasing Costs		$	83,629			$	(28,278	)		$	55,351
Financing Costs			24,648				(6,291	)			18,357
Total		$	108,277			$	(34,569	)		$	73,708

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

6. INTANGIBLE ASSETS AND LIABILITIES

As of June 30, 2007 and December 31, 2006, the Company’s intangible assets and liabilities were comprised of the following (in thousands):

		June 30, 2007
						Accumulated				Deferred Costs,
		Total Cost				Amortization				net
Intangible Assets:
In-place lease value		$	182,148			$	(55,584	)		$	126,564
Tenant relationship value			120,532				(26,309	)			94,223
Above market leases acquired			31,950				(13,268	)			18,682
Total intangible assets		$	334,630			$	(95,161	)		$	239,469
Intangible Liability:
Below market leases acquired		$	102,754			$	(30,495	)		$	72,259

		December 31, 2006
						Accumulated				Deferred Costs,
		Total Cost				Amortization				net
Intangible Assets:
In-place lease value		$	207,513			$	(52,293	)		$	155,220
Tenant relationship value			124,605				(19,572	)			105,033
Above market leases acquired			32,667				(11,669	)			20,998
Total intangible assets		$	364,785			$	(83,534	)		$	281,251
Intangible Liability:
Below market leases acquired		$	118,536			$	(26,009	)		$	92,527

As of June 30, 2007, the Company’s annual amortization for its intangible assets/liabilities is as follows (in thousands, and assuming no early lease terminations):

		Assets				Liabilities
2007 (remainder)		$	28,702			$	8,813
2008			46,841				13,469
2009			40,923				11,444
2010			34,221				8,899
2011			26,808				7,435
Thereafter			61,974				22,199
Total		$	239,469			$	72,259

7. DEBT OBLIGATIONS

The following table sets forth information regarding the Company’s debt obligations outstanding at June 30, 2007 and December 31, 2006 (in thousands):

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

MORTGAGE DEBT:

										Effective
		June 30,				December 31,				Interest				Maturity
Property / Location		2007				2006				Rate				Date
Interstate Center		$	—			$	552			6.19%				Mar-07
The Bluffs			—				10,700			6.00%		(a)		Apr-07
Pacific Ridge			—				14,500			6.00%		(a)		Apr-07
Pacific View/Camino			—				26,000			6.00%		(a)		Apr-07
Computer Associates Building			—				31,000			6.00%		(a)		Apr-07
Presidents Plaza			—				30,900			6.00%		(a)		Apr-07
440 & 442 Creamery Way			—				5,421			8.55%				May-07
Grande A			59,297				59,513			7.48%		(b)		Jul-07
Grande B			76,731				77,535			7.48%		(b)		Jul-07
481 John Young Way			2,259				2,294			8.40%				Nov-07
400 Commerce Drive			11,681				11,797			7.12%				Jun-08
Two Logan Square			70,745				71,348			5.78%		(a)		Jul-09
200 Commerce Drive			5,802				5,841			7.12%		(a)		Jan-10
1333 Broadway			24,209				24,418			5.18%		(a)		May-10
The Ordway			45,861				46,199			7.95%		(a)		Aug-10
World Savings Center			27,334				27,524			7.91%		(a)		Nov-10
Plymouth Meeting Exec.			43,793				44,103			7.00%		(a)		Dec-10
Four Tower Bridge			10,591				10,626			6.62%				Feb-11
Arboretum I, II, III & V			22,492				22,750			7.59%				Jul-11
Midlantic Drive/Lenox Drive/DCC I			61,958				62,678			8.05%				Oct-11
Research Office Center			41,872				42,205			7.64%		(a)		Oct-11
Concord Airport Plaza			38,021				38,461			7.20%		(a)		Jan-12
Six Tower Bridge			14,655				14,744			7.79%				Aug-12
Newtown Square/Berwyn Park/Libertyview			62,721				63,231			7.25%				May-13
Coppell Associates			3,626				3,737			6.89%				Dec-13
Southpoint III			4,692				4,949			7.75%				Apr-14
Tysons Corner			100,000				100,000			4.84%		(a)		Aug-15
Coppell Associates			16,600				16,600			5.75%				Mar-16
Principal balance outstanding			744,940				869,626
Plus: unamortized fixed-rate debt premiums, net			12,205				14,294
Total mortgage indebtedness		$	757,145			$	883,920
UNSECURED DEBT:
Private Placement Notes due 2008			113,000				113,000			4.34%				Dec-08
2009 Three Year Notes			—				300,000			Libor + 0.45%				Apr-09
2009 Five Year Notes			275,000				275,000			4.62%				Nov-09
2010 Five Year Notes			300,000				300,000			5.61%				Dec-10
Line-of-Credit			210,000				60,000			Libor + 0.725%				Jun-11
3.875% Exchangeable Notes			345,000				345,000			3.87%				Oct-11
2012 Six Year Notes			300,000				300,000			5.77%				Apr-12
2014 Ten Year Notes			250,000				250,000			5.53%				Nov-14
2016 Ten Year Notes			250,000				250,000			5.95%				Apr-16
2017 Ten Year Notes			300,000				—			5.72%				May-17
Indenture IA (Preferred Trust I)			27,062				27,062			Libor + 1.25%				Mar-35
Indenture IB (Preferred Trust I)			25,774				25,774			Libor + 1.25%				Apr-35
Indenture II (Preferred Trust II)			25,774				25,774			Libor + 1.25%				Jul-35
Principal balance outstanding			2,421,610				2,271,610
Plus: unamortized fixed-rate debt discounts, net			(3,540	)			(3,300	)
Total mortgage indebtedness		$	2,418,070			$	2,268,310
Total Debt Obligations		$	3,175,215			$	3,152,230

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

The mortgage note payable balance of $5.1 million for Norriton Office Center as of December 31, 2006, not included in the table above, is included in Mortgage notes payable and other liabilities held for sale on the consolidated balance sheets.

As of June 30, 2007 and 2006, the Company’s weighted-average effective interest rate on its mortgage notes payable was 6.9% and 6.1%, respectively.

On April 30, 2007, the Operating Partnership completed an underwritten public offering of $300,000,000 aggregate principal amount of unsecured notes due 2017 (the “2017 Notes”). Brandywine Realty Trust guaranteed the payment of principal and interest on the 2017 Notes. The Company used proceeds from these notes to reduce borrowings under the Company’s revolving credit facility.

On March 28, 2006, the Operating Partnership completed an underwritten public offering of (1) $300,000,000 aggregate principal amount of unsecured floating rate notes due 2009 (the “2009 Notes”), (2) $300,000,000 aggregate principal amount of 5.75% unsecured notes due 2012 (the “2012 Notes”) and (3) $250,000,000 aggregate principal amount of 6.00% unsecured notes due 2016 (the “2016 Notes”). Brandywine Realty Trust guaranteed the payment of principal and interest on the 2009 Notes, the 2012 Notes and the 2016 Notes. The Company used proceeds from these notes to repay a term loan obtained to finance a portion of the consideration paid in the Prentiss merger and to reduce borrowings under the Company’s revolving credit facility.

On October 4, 2006, the Operating Partnership sold $300.0 million aggregate principal amount of unsecured 3.875% Exchangeable Guaranteed Notes due 2026 in reliance upon an exemption from registration rights under Rule 144A under the Securities Act of 1933 and sold an additional $45 million of 3.875% Exchangeable Guaranteed Notes due 2026 on October 16, 2006 to cover over-allotments. The Operating Partnership has registered the resale of the exchangeable notes. At certain times and upon certain events, the notes are exchangeable for cash up to their principal amount and with respect to the remainder, if any, of the exchange value in excess of such principal amount, cash or shares of the Company’s common share. The initial exchange rate is 25.4065 shares per $1,000 principal amount of notes (which is equivalent to an initial exchange price of $39.36 per share). The Operating Partnership may not redeem the notes prior to October 20, 2011 (except to preserve the Company’s status as a REIT for U.S. federal income tax purposes), but we may redeem the notes at any time thereafter, in whole or in part, at a redemption price equal to the principal amount of the notes to be redeemed plus accrued and unpaid interest. In addition, on October 20, 2011, October 15, 2016 and October 15, 2021 as well as upon the occurrence of certain change in control transactions prior to October 20, 2011, holders of notes may require the Company to repurchase all or a portion of the notes at a purchase price equal to the principal amount plus accrued and unpaid interest. The Operating Partnership used net proceeds from the notes to repurchase approximately $60.0 million of the Company’s common stock at a price of $32.80 per share and for general corporate purposes, including the repayment of outstanding borrowings under the Credit Facility.

On November 29, 2006, the Company gave notice of redemption of the 2009 Notes and redeemed the 2009 Notes on January 2, 2007.

The Operating Partnership’s indenture relating to unsecured notes contains financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40%, (3) a debt service coverage ratio of greater than 1.5 to 1.0, and (4) an unencumbered asset value of not less than 150% of unsecured debt. In addition, the note purchase agreement relating to the Operating Partnership’s $113 million principal unsecured notes due 2008 contains covenants that are similar to the covenants in the indenture.

The Company utilizes credit facility borrowings for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. On June 29, 2007, the Company amended its $600.0 million unsecured revolving credit facility (the “Credit Facility”). The amendment extended the maturity date of the Credit Facility from December 22, 2009 to June 29, 2011 (subject to an extension of one year, at the Company’s option, upon its payment of an extension fee equal to 15 basis points of the committed amount under the Credit Facility). The amendment also reduced the per annum variable interest rate on outstanding balances from Eurodollar

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

plus 0.80% to Eurodollar plus 0.725% per annum. In addition, the amendment reduced the quarterly facility fee from 20 basis points to 17.5 basis points per annum. The interest rate and facility fee are subject to adjustment upon a change in the Company’s unsecured debt ratings. The amendment also lowered to 7.50% from 8.50% the capitalization rate used in the calculation of several of the financial covenants; increased our swing loan availability from $50.0 million to $60.0 million; and increased the number of competitive bid loan requests available to the Company from two to four in any 30 day period. The competitive bid feature allows banks that are part of the lender consortium under the Credit Facility to bid to make loans to the Company at a reduced Eurodollar rate. The Company has the option to increase the Credit Facility to $800.0 million subject to the absence of any defaults and the Company’s ability to acquire additional commitments from its existing lenders or new lenders. As of June 30, 2007, the Company had $210.0 million of borrowings and $22.5 million of letters of credit outstanding under the Credit Facility, leaving $367.5 million of unused availability. As of June 30, 2007 and 2006, the weighted-average interest rate on the Credit Facility, including the effect of interest rate hedges, was 6.35% and 5.48%, respectively.

The Credit Facility requires the maintenance of ratios related to minimum net worth, debt-to-total capitalization and fixed charge coverage and includes non-financial covenants.

In April 2007, the Company entered into a $20.0 million Sweep Agreement (the “Sweep Agreement”) to be used for cash management purposes. Borrowings under the Sweep Agreement bear interest at one-month LIBOR plus 0.75%. There were no outstanding borrowings on the Sweep Agreement at June 30, 2007.

As of June 30, 2007, the Company’s aggregate scheduled principal payments of debt obligations, excluding amortization of discounts and premiums, are as follows (in thousands):

2007		$	143,236
2008			135,148
2009			354,955
2010			450,189
2011			687,262
Thereafter			1,395,760
Total indebtedness		$	3,166,550

8. RISK MANAGEMENT AND USE OF FINANCIAL INSTRUMENTS

Risk Management

In the normal course of its on-going business operations, the Company encounters economic risk. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk on its interest-bearing liabilities. Credit risk is the risk of inability or unwillingness of tenants to make contractually required payments. Market risk is the risk of declines in the value of properties due to changes in rental rates, interest rates or other market factors affecting the valuation of properties held by the Company.

Use of Derivative Financial Instruments

The Company’s use of derivative instruments is limited to the utilization of interest rate agreements or other instruments to manage interest rate risk exposures and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure, as well as to hedge specific transactions. The counterparties to these arrangements are major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company is potentially exposed to credit loss in the event of non-performance by these counterparties. However, because of the high credit ratings of the counterparties, the Company does not anticipate that any of the counterparties will fail to meet these obligations as they come due. The Company does not hedge credit or property value market risks.

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

In March 2007, in anticipation of the offering of 2017 Notes, the Company entered into two treasury lock agreements. The treasury lock agreements were designated as cash flow hedges on interest rate risk and qualified for hedge accounting. Each of the treasury lock agreements were for notional amounts of $75.0 million for an expiration of 10 years at all-in rates of 4.5585% and 4.498%. The agreements were settled in April 2007 upon completion of the offering of the 2017 Notes at a total benefit of $1.1 million. This benefit was recorded as a component of accumulated other comprehensive income in the accompanying consolidated balance sheet and is being amortized over the term of the 2017 Notes.

In March 2006, in anticipation of the offering of the 2009 Notes, the 2012 Notes and the 2016 Notes, the Company entered into forward starting swaps. The forward starting swaps were designated as cash flow hedges of interest rate risk and qualified for hedge accounting. The forward starting swaps were for notional amounts totaling $200.0 million at an all-in-rate of 5.2%. Two of the forward starting swaps had a six year maturity date and one had a ten year maturity date. The forward starting swaps were settled in March 2006 upon the completion of the offering of the 2009, 2012, and 2016 Notes at a total benefit of approximately $3.3 million. The benefit was recorded as a component of accumulated other comprehensive income in the accompanying consolidated balance sheet and is being amortized to interest expense over the term of the unsecured notes.

The Company entered into two interest rate swaps in January 2006 aggregating $90 million in notional amount as part of its acquisition of Prentiss. The instruments were used to hedge the risk of interest cash outflows on secured variable rate debt on properties that were included as part of the real estate venture in which the Company purchased the remaining 49% of the minority interest partner’s share in March 2007. One of the swaps with a notional amount of $20 million had a maturity date of February 1, 2010 at an all-in rate of 4.675%. The other, with a notional amount of $70 million, had a maturity date of August 1, 2008 at an all in rate of 4.675%. The agreements were settled in April 2007 in connection with the repayment of five mortgage notes, at a total benefit of $0.4 million.

The Company formally assesses, both at inception of the hedge and on an on-going basis, whether each derivative is highly-effective in offsetting changes in cash flows of the hedged item. If management determines that a derivative is not highly-effective as a hedge or if a derivative ceases to be a highly-effective hedge, the Company will discontinue hedge accounting prospectively.

Concentration of Credit Risk

Concentrations of credit risk arise when a number of tenants related to the Company’s investments or rental operations are engaged in similar business activities, or are located in the same geographic region, or have similar economic features that would cause their inability to meet contractual obligations, including those to the Company, to be similarly affected. The Company regularly monitors its tenant base to assess potential concentrations of credit risk. Management believes the current credit risk portfolio is reasonably well diversified and does not contain any unusual concentration of credit risk. No tenant accounted for 5% or more of the Company’s rents during the three- and six-month periods ended June 30, 2007 or 2006.

9. DISCONTINUED OPERATIONS

For the three- and six-month periods ended June 30, 2007, income from discontinued operations relates to 18 properties that the Company sold during 2007. The following table summarizes the revenue and expense information for properties classified as discontinued operations as of June 30, 2007 for the three- and six-month periods ended June 30, 2007 (in thousands):

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

		Three-month period				Six-month period
		ended June 30, 2007				ended June 30, 2007
Revenue:
Rents		$	1,460			$	12,397
Tenant reimbursements			562				1,246
Other			145				214
Total revenue			2,167				13,857
Expenses:
Property operating expenses			833				4,845
Real estate taxes			241				1,549
Depreciation and amortization			—				4,594
Total operating expenses			1,074				10,988
Operating income			1,093				2,869
Income from discontinued operations before (loss) gain on sale of interests in real estate and minority interest			1,093				2,869
Net (loss) gain on sale of interests in real estate			(856	)			25,153
Minority interest attributable to discontinued operations — LP units			(10	)			(1,196	)
Income from discontinued operations		$	227			$	26,826

For the three- and six-month periods ended June 30, 2006, income from discontinued operations relates to the 23 properties sold in 2006 and the 18 properties sold in 2007. The following table summarizes the revenue and expense information for the properties classified as discontinued operations as of June 30, 2007 for the three- and six-month periods ended June 30, 2006 (in thousands):

		Three-month period				Six-month period
		ended June 30, 2006				ended June 30, 2006
Revenue:
Rents		$	21,505			$	46,218
Tenant reimbursements			1,740				4,209
Other			217				587
Total revenue			23,462				51,014
Expenses:
Property operating expenses			8,609				18,020
Real estate taxes			2,700				6,187
Depreciation and amortization			9,746				18,869
Total operating expenses			21,055				43,076
Operating income			2,407				7,938
Interest income			13				13
Interest expense (a)			(301	)			(586	)
Income from discontinued operations before gain on sale of interests in real estate and minority interest			2,119				7,365
Minority interest — partners’ share of consolidated real estate venture			(195	)			(382	)
Minority interest attributable to discontinued operations — LP units			(92	)			(319	)
Income from discontinued operations		$	1,832			$	6,664

Discontinued operations have not been segregated in the consolidated statements of cash flows. Therefore, amounts for certain captions will not agree with respective data in the consolidated statements of operations.

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

10. MINORITY INTEREST IN OPERATING PARTNERSHIP AND REAL ESTATE VENTURES

The Company is the sole general partner of the Operating Partnership and, as of June 30, 2007, owned a 95.7% interest in the Operating Partnership. On June 12, 2007, the Operating Partnership declared a $0.44 per unit cash distribution to holders of Class A Units totaling $1.7 million.

As of June 30, 2007, the Company owned interests in three consolidated real estate ventures that own three office properties containing approximately 0.4 million net rentable square feet. Minority interest in consolidated real estate ventures represents the portion of these consolidated real estate ventures not owned by the Company and as a result of losses allocated to these minority interest partners there is no balance at June 30, 2007.

On March 1, 2007, the Company acquired the remaining 49% interest in a real estate venture previously owned by Stichting Pensioenfonds ABP containing ten office properties for a purchase price of $63.7 million. The Company owned a 51% interest in this real estate venture through the acquisition of Prentiss on January 5, 2006.

11. BENEFICIARIES’ EQUITY

Earnings per Share (EPS)

The following table details the number of shares and net income used to calculate basic and diluted earnings per share (in thousands, except share and per share amounts; results may not add due to rounding):

		Three-month periods ended June 30,
		2007								2006
		Basic				Diluted				Basic				Diluted
Income (loss) from continuing operations		$	977			$	977			$	(13,388	)		$	(13,388	)
Income (loss) from discontinued operations			227				227				1,832				1,832
Income allocated to Preferred Shares			(1,998	)			(1,998	)			(1,998	)			(1,998	)
Net income available to common shareholders		$	(794	)		$	(794	)		$	(13,554	)		$	(13,554	)
Weighted-average shares outstanding			87,080,785				87,080,785				90,540,237				90,540,237
Contingent securities/Stock based compensation			—				—				—				—
Total weighted-average shares outstanding			87,080,785				87,080,785				90,540,237				90,540,237
Earnings per Common Share:
Continuing operations		$	(0.01	)		$	(0.01	)		$	(0.17	)		$	(0.17	)
Discontinued operations			—				—				0.02				0.02
		$	(0.01	)		$	(0.01	)		$	(0.15	)		$	(0.15	)

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

		Six-month periods ended June 30,
		2007								2006
		Basic				Diluted				Basic				Diluted
Income (loss) from continuing operations		$	(6,250	)		$	(6,250	)		$	(20,862	)		$	(20,862	)
Income (loss) from discontinued operations			26,826				26,826				6,664				6,664
Income allocated to Preferred Shares			(3,996	)			(3,996	)			(3,996	)			(3,996	)
Net income available to common shareholders		$	16,580			$	16,580			$	(18,194	)		$	(18,194	)
Weighted-average shares outstanding			87,680,773				87,680,773				89,923,528				89,923,528
Contingent securities/Stock based compensation			—				617,748				—				—
Total weighted-average shares outstanding			87,680,773				88,298,521				89,923,528				89,923,528
Earnings per Common Share:
Continuing operations		$	(0.12	)		$	(0.12	)		$	(0.28	)		$	(0.28	)
Discontinued operations			0.31				0.30				0.07				0.07
		$	0.19			$	0.19			$	(0.20	)		$	(0.20	)