UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

o		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		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		(I.R.S. Employer Identification No.)
Incorporation or organization)
555 East Lancaster Avenue
Radnor, Pennsylvania		19087
(Address of principal executive offices)		(Zip Code)

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

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

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

Securities registered pursuant to Section 12(g) of the Act:
Units of General Partnership Interest (Brandywine Operating Partnership, L.P.)

(Title of class)

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

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

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 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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

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

The aggregate market value of the Common Shares of Beneficial Interest held by non-affiliates of Brandywine Realty Trust as of the last day of the registrant’s most recently completed second fiscal quarter was $2.9 billion. 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 88,599,963 Common Shares of Beneficial Interest were outstanding as of February 22, 2007.

As of June 30, 2006, the aggregate market value of the 2,309,051 common units of limited partnership (“Units”) held by non-affiliates of Brandywine Operating Partnership, L.P. was $74.3 million based upon the last report sale price of $32.17 per share on the New York Stock Exchange on June 30, 2006 of the Common Shares of Beneficial Interest of Brandywine Realty Trust, the sole general partner of Brandywine Operating Partnership, L.P. (For this computation, the Registrant has excluded the market value of all Units beneficially owned by Brandywine Realty Trust.)

Documents Incorporated By Reference

Portions of the proxy statement for the Annual Meeting of Shareholders of Brandywine Realty Trust to be held on May 9, 2007 are incorporated by reference into Part III of this Form 10-K.

The exhibit index as required by Item 601(a) of Regulation S-K is included in Item 15 of Part IV of this report.

 

 

TABLE OF CONTENTS

FORM 10-K

		Page
PART I
Item 1. Business			5
Item 1A. Risk Factors			13
Item 1B. Unresolved Staff Comments			22
Item 2. Properties			22
Item 3. Legal Proceedings			35
Item 4. Submission of Matters to a Vote of Security Holders			35
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities			35
Item 6. Selected Financial Data			39
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			41
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			60
Item 8. Financial Statements and Supplementary Data			60
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			60
Item 9A. Controls and Procedures			60
Item 9B. Other Information			61
PART III
Item 10. Directors and Executive Officers of the Registrant			61
Item 11. Executive Compensation			61
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters			62
Item 13. Certain Relationships and Related Transactions			62
Item 14. Principle Accountant Fees and Services			62
PART IV
Item 15. Exhibits and Financial Statement Schedules			62
SIGNATURES			69
Statement re Computation of Ratios of Brandywine Realty Trust
Statement re Computation of Ratios of Brandywine Operating Partnership, L.P.
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm
Consent of Independent Registered Public Accounting Firm
Certification Pursuant to Rules 13a-14(a) and 15d-14(a)
Certification Pursuant to Rules 13a-14(a) and 15d-14(a)
Certification Pursuant to Rules 13a-14(a) and 15d-14(a)
Certification Pursuant to Rules 13a-14(a) and 15d-14(a)
Rule 13(a)-14(b) Certification
Rule 13(a)-14(b) Certification
Rule 13(a)-14(b) Certification
Rule 13(a)-14(b) Certification

Filing Format

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

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This Annual Report on Form 10-K and other materials filed by us with the SEC (as well as information included in oral or other written statements made by us) contain statements that are forward-looking, including statements relating to business and real estate development activities, acquisitions, dispositions, future capital expenditures, financing sources, governmental regulation (including environmental regulation) and competition. We intend such forward-looking statements to be covered by the safe-harbor provisions of the 1995 Act. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. As forward-looking statements, these statements involve important risks, uncertainties and other factors that could cause actual results to differ materially from the expected results and, accordingly, such results may differ from those expressed in any forward-looking statements made by us or on our behalf. Factors that could cause actual results to differ materially from our expectations include, but are not limited to:

	•		changes in general economic conditions;
	•		changes in local real estate conditions (including changes in rental rates and the number of properties that compete with our properties);
	•		changes in the economic conditions affecting industries in which our principal tenants compete;
	•		our failure to lease unoccupied space in accordance with our projections;
	•		our failure to re-lease occupied space upon expiration of leases;
	•		the bankruptcy of major tenants;
	•		changes in prevailing interest rates;
	•		the unavailability of equity and debt financing;
	•		failure of acquisitions to perform as expected;
	•		unanticipated costs associated with, and integration of, our acquisitions;
	•		unanticipated costs to complete and lease-up pending developments;
	•		impairment charges;
	•		increased costs for, or lack of availability of, adequate insurance, including for terrorist acts;
	•		demand for tenant services beyond those traditionally provided by landlords;
	•		potential liability under environmental or other laws;
	•		earthquakes and other natural disasters;
	•		complex regulations relating to our status as a REIT and to our acquisition, disposition and development activities;

	•		the adverse consequences of our failure to qualify as a REIT; and
	•		the impact of newly adopted accounting principles on our accounting policies and on period-to-period comparisons of financial results.

Given these uncertainties, and the other risks identified in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, we caution readers not to place undue reliance on forward-looking statements. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

PART I

Item 1. Business

Introduction

The terms “we,” “us,” “our” or the “Company” refer to Brandywine Realty Trust, a Maryland real estate investment trust, individually or together with its consolidated subsidiaries, including Brandywine Operating Partnership, L.P. (the “Operating Partnership”), a Delaware limited partnership.

We are a self-administered and self-managed real estate investment trust, or REIT, active in acquiring, developing, redeveloping, leasing and managing office and industrial properties. As of December 31, 2006, we owned 261 office properties, 23 industrial facilities and one mixed-use property (which we refer to collectively, the “Properties”) containing an aggregate of approximately 28.2 million net rentable square feet. We also have six properties under development, three properties under redevelopment and four lease-up properties containing an aggregate of 2.1 million net rentable square feet. As of December 31, 2006, we owned economic interests in 11 unconsolidated real estate ventures that contain approximately 2.7 million net rentable square feet and in four consolidated real estate ventures that own 15 office properties containing approximately 1.5 million net rentable square feet (which we refer to collectively as the “Real Estate Ventures”). In addition, as of December 31, 2006, we owned approximately 490 acres of undeveloped land. The Properties are located in and surrounding Philadelphia, Wilmington, Southern and Central New Jersey, Richmond, Metropolitan Washington, D.C., Dallas/Fort Worth, Austin, Oakland, San Diego and Los Angeles. In addition to managing properties that we own, as of December 31, 2006, we were managing approximately 13.0 million square feet of office and industrial properties for third parties and Real Estate Ventures. Unless otherwise indicated, all references to square feet represent net rentable area.

Organization

Brandywine Realty Trust was organized and commenced its operations in 1986 as a Maryland REIT. Brandywine Realty Trust owns its assets and conducts its operations through the Operating Partnership and subsidiaries of the Operating Partnership. Brandywine Realty Trust controls the Operating Partnership as its sole general partner and as of December 31, 2006 owned a 95.7% interest in the Operating Partnership. The holders of the remaining interests in the Operating Partnership, consisting of Class A units of limited partnership interest, have the right to require redemption of their units at any time. At our option, we may 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. Our structure as an “UPREIT” is designed, in part, to permit persons contributing properties to us to defer some or all of the tax liability they might otherwise incur in a sale of properties.

Our executive offices are located at 555 East Lancaster Avenue, Radnor, Pennsylvania 19087 and our telephone number is (610) 325-5600. We have regional offices in Mount Laurel, New Jersey; Philadelphia, Pennsylvania; Richmond, Virginia; Falls Church, Virginia; Austin, Texas; Dallas, Texas; Oakland, California; and Carlsbad, California. We have an internet website at www.brandywinerealty.com. We are not incorporating by reference into this Annual Report on Form 10-K any material from our website. The reference to our website is an inactive textual reference to the uniform resource locator (URL) and is for your reference only.

Acquisition of Prentiss Properties Trust in January 2006

On January 5, 2006, we acquired Prentiss Properties Trust (“Prentiss”) under an agreement and plan of merger that we entered into with Prentiss on October 3, 2005. In conjunction with our acquisition of Prentiss, designees of The Prudential Insurance Company of America (“Prudential”) acquired Prentiss properties that contain an aggregate of approximately 4.32 million net rentable square feet for total consideration of approximately $747.7 million. Through our acquisition of Prentiss (and after giving effect to the Prudential acquisition of Prentiss properties), we acquired a portfolio of 79 office properties (including 13 properties that are owned by consolidated Real Estate Ventures and seven properties that are owned by unconsolidated Real Estate Ventures) that contain an aggregate of 14.0 million net rentable square feet. In addition, through our acquisition of Prentiss we entered into new geographic markets, primarily Southern and Northern California, Dallas/Fort Worth and Austin, Texas and

Metropolitan Washington, D.C. and decreased our relative concentration in Philadelphia and the Mid-Atlantic region.

In our 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 Prentiss’s 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 our Operating Partnership. Accordingly, based on 49,375,723 Prentiss common shares outstanding at closing of the acquisition, we issued 34,446,446 Brandywine common shares and paid an aggregate of approximately $1.05 billion in cash for the accounts of the former Prentiss shareholders. Based on 1,572,612 Prentiss OP Units outstanding at closing of the acquisition, we issued 2,170,047 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 our acquisition of Prentiss we also assumed approximately $647.3 million in aggregate principal amount of Prentiss debt.

We 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 acquisition through (i) a $750 million unsecured term loan that we repaid in full on March 28, 2006; (ii) approximately $676.5 million of cash received from Prudential’s acquisition of the Prentiss properties; and (iii) approximately $195.0 million through borrowing under our revolving credit facility.

2006 Transactions

Real Estate Acquisitions/Dispositions

In addition to our January 2006 acquisition of properties through our merger with Prentiss, and the concurrent disposition of properties to Prudential, in 2006 we acquired five office properties that contain an aggregate of 839,704 net rentable square feet and 93.4 acres of land, and we sold 23 office properties that contain an aggregate of 3,364,215 net rentable square feet and 76.7 acres of land, as indicated below:

	§		In January 2006, we sold 850/950 Warrenville Road, two properties totaling 99,470 square feet in Chicago, Illinois for a sales price of $15.3 million.
	§		In February 2006, we acquired 100 Lenox Drive, a property totaling 92,980 square feet in Lawrenceville, New Jersey for a purchase price of $10.2 million.
	§		In February 2006, we sold 550/650 Warrenville Road, 1050 Warrenville Road, 701 Warrenville Road and 801 Cherry Street, five properties totaling 1,316,744 square feet in Chicago, Illinois and Fort Worth, Texas for an aggregate sales price of $207.3 million.
	§		In March 2006, we sold 8755 W. Higgins Road, a property totaling 237,320 square feet in Chicago, Illinois for a sales price of $30.0 million.
	§		In April 2006, we acquired One Paragon, a property totaling 145,127 square feet in Richmond, Virginia for a purchase price of $24.0 million. We also acquired a 47.9 acre land parcel in Mt. Laurel, New Jersey and a 5.5 acre land parcel in Newtown (Delaware County), Pennsylvania for a total purchase price of $8.6 million.
	§		In April 2006, we sold 1.3 acres of land in Radnor, Pennsylvania for a sales price of $4.5 million.
	§		In June 2006, we acquired a 23.2 acre land parcel in Goochland County, Virginia for a purchase price of $4.6 million.
	§		In June 2006, we sold 505 Millenium Drive, a property totaling 98,586 square feet in Allen, Texas and 5.5 acres of land in Westampton, New Jersey for a an aggregate sales price of $6.4 million.

	§		In July 2006, we sold 110 Summit Drive, a property totaling 43,660 square feet in Exton, Pennsylvania for a sales price of $3.7 million.
	§		In August 2006, we acquired 2340 Dulles Corner Boulevard, a property totaling 264,405 square feet in Herndon, Virginia, for a purchase price of $79.0 million and 2355 Dulles Corner Boulevard, a property totaling 179,176 square feet in Herndon, Virginia for a purchase price of $55.0 million.
	§		In August 2006, we sold 8144 Walnut Hill Lane, property totaling 464,470 square feet in Dallas, Texas, 111 Presidential Boulevard, a property totaling 172,894 square feet in Bala Cynwyd, Pennsylvania, 220 Cabot Drive, a property totaling 124,327 square feet in Lisle, Texas and 10.9 acres of land in Sacramento, California for an aggregate sales price of $127.6 million.
	§		In October 2006, we acquired a 16.8 acre land parcel in Austin, Texas for a purchase price of $2.5 million.
	§		In November 2006, we sold King & Harvard Drive and One South Union Avenue, two properties totaling 167,017 square feet in Cherry Hill, New Jersey and 1255 Corporate Drive, a property totaling 150,019 square feet in Irving, Texas for an aggregate sales price of $37.8 million.
	§		In November 2006, we acquired 2251 Corporate Park Drive, a property totaling 158,016 square feet in Herndon, Virginia for a purchase price of $59.0 million.
	§		In December 2006, we sold 2110 Walnut Hill Lane, three properties totaling 164,782 square feet in Irving, Texas, 105/140 Terry Drive, two properties totaling 128,666 square feet in Newtown, Pennsylvania and 3890/3860 West Northwest Highway, two properties totaling 196,260 square feet in Dallas, Texas for an aggregate sales price of $45.0 million. We also sold 59.0 acres of land in Newtown, Pennsylvania for a sales price of $19.0 million.

Developments

In 2006 we placed in service two office properties that we developed and that contain an aggregate of 782,595 net rentable square feet. We place a property in services at the earlier of (i) the date at which we estimate the property to be 95% occupied and (ii) one year from the project completion date. At December 31, 2006 we had nine properties under development or redevelopment that contain an aggregate of 1.4 million net rentable square feet at an estimated total development cost of $304.3 million. We expect to place these projects in service at dates between between the second quarter of 2007 and the fourth quarter of 2008.

Unsecured Debt Financings

On March 28, 2006, we completed an underwritten public offering of (1) $300,000,000 aggregate principal amount of floating rate guaranteed notes due 2009, (2) $300,000,000 aggregate principal amount of 5.75% guaranteed notes due 2012 and (3) $250,000,000 aggregate principal amount of 6.00% guaranteed notes due 2016. We used proceeds from these notes to repay a term loan that we obtained to finance a portion of the consideration that we paid in the Prentiss merger and to reduce borrowings under our revolving credit facility.

On October 4, 2006, we completed an offering of $300.0 million aggregate principal amount of 3.875% senior convertible notes due 2026 in an offering made in reliance upon an exemption from registration rights under Rule 144A under the Securities Act of 1933 and issued an additional $45 million of exchangeable notes on October 16, 2006 to cover over-allotments. At certain times and upon the occurrence of certain events, the notes are exchangable into 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 shares. The initial exchange rate is 25.4065 shares per $1,000 principal amount of notes (which is equivalent to an initial conversion price of $39.36 per share). The notes may not be redeemed by us prior to October 20, 2011 (except to preserve the Company’s status as a REIT), but are redeemable anytime thereafter, in whole or in part, at a redemption price equal to the principal amount of the notes plus any accrued and unpaid interest (including additional interest), if any. In addition, on October 20, 2011, October 15, 2016, and October 15, 2021, or upon the occurrence of certain change in control transactions prior to October 20, 2011, note holders may require us to repurchase all or a portion of the notes at a purchase price equal to the principal amount plus any accrued and unpaid interest on the notes. Net

proceeds from the October 2006 note offering were used to repurchase approximately $60.0 million of common shares at an average price of $32.80 per share and for general corporate purposes, including the repayment of outstanding borrowings under our unsecured revolving credit facility.

Business Objective and Strategies for Growth

Our business objective is to deploy capital effectively to maximize our return on investment and thereby maximize our total return to shareholders. To accomplish this objective we seek to:

	•		maximize cash flow through leasing strategies designed to capture rental growth as rental rates increase and as below-market leases are renewed;
	•		attain a high tenant retention rate by providing a full array of property management and maintenance services and tenant service programs responsive to the varying needs of our diverse tenant base;
	•		increase the economic diversification of our tenant base while maximizing economies of scale;
	•		as warranted by market conditions, deploy our land inventory and seek new land parcels on which to develop high-quality office and industrial properties to service our tenant base;
	•		capitalize on our redevelopment expertise to selectively acquire, redevelop and reposition properties in desirable locations;
	•		acquire high-quality office and industrial properties and portfolios of such properties at attractive yields in markets that we expect will experience economic growth;
	•		form joint venture opportunities with high-quality partners having attractive real estate holdings or significant financial resources; and
	•		utilize our reputation as a full-service real estate development and management organization to identify opportunities that will expand our business and create long-term value.

We expect to concentrate our real estate activities in markets where we believe that:

	•		current and projected market rents and absorption statistics justify construction activity;
	•		we can maximize market penetration by accumulating a critical mass of properties and thereby enhance operating efficiencies;
	•		barriers to entry (such as zoning restrictions, utility availability, infrastructure limitations, development moratoriums and limited developable land) will create supply constraints on office and industrial space; and
	•		there is potential for economic growth, particularly job growth and industry diversification.

Operating Strategy

We believe that we are well positioned in our current markets and have the expertise to take advantage of both development and acquisition opportunities in new markets that have healthy long-term fundamentals and strong growth projections. This capability, combined with what we believe is a conservative financial structure, allows us to concentrate our growth efforts towards selective development alternatives and acquisition opportunities. These abilities are integral to our strategy of having a geographically and physically diverse portfolio of assets, which will meet the needs of our tenants. Through our merger with Prentiss and our 2006 development and disposition activities, we commenced operations in Southern and Northern California, Austin and Dallas, TX and Metropolitan Washington D.C. metropolitan region and have decreased our relative concentrations in Philadelphia and the Mid-Atlantic region. We have also expanded our overall development pipeline and are pursuing acquisitions of sites on which we can capitalize on our own development and market expertise.

We expect that selective development of new office properties will continue to be important to the growth of our portfolio over the next several years. We use experienced on site construction superintendents, operating under the supervision of project managers and senior management, to control the construction process and mitigate the various risks associated with real estate development. We believe we understand and effectively manage the risks associated with development and construction, and these risks are justified by higher potential yields.

We expect to continue to operate in markets where we have a concentration advantage due to economies of scale. We believe that where possible, it is best to operate with a strong base of properties in order to benefit from the personnel allocation and the market strength associated with managing several properties in the same market. However, we intend to selectively dispose of properties and redeploy capital if we determine a property cannot meet long term earnings growth expectations. We believe that recycling capital is an important aspect of maintaining the overall quality of our portfolio.

Policies With Respect To Certain Activities

The following is a discussion of our investment, financing and other policies. These policies have been determined by our Board of Trustees and our Board may revise these policies without a vote of shareholders.

Investments in Real Estate or Interests in Real Estate

We may develop, purchase or lease income-producing properties for long-term investment, expand and improve the properties presently owned or other properties purchased, or sell such properties, in whole or in part, as circumstances warrant. Although there is no limitation on the types of development activities that we may undertake, we expect that our development activities will meet current market demand and will generally be on a build-to-suit basis for particular tenants, or where a significant portion of the building is pre-leased before construction begins. We may also participate with other entities in property ownership through joint ventures or other types of co-ownership. Our equity investments may be subject to existing or future mortgage financing and other indebtedness that will have priority over our equity investments.

Securities of or Interests in Entities Primarily Engaged in Real Estate Activities and Other Issuers

Subject to the percentage of ownership limitations and gross income tests necessary for REIT qualification, we may invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers. We may enter into joint ventures or partnerships for the purpose of obtaining an equity interest in a particular property. We do not currently intend to invest in the securities of other issuers except in connection with joint ventures or acquisitions of indirect interests in properties.

Investments in Real Estate Mortgages

While our current portfolio consists of, and our business objectives emphasize, equity investments in commercial real estate, we may, at the discretion of management or our Board of Trustees, invest in other types of equity real estate investments, mortgages and other real estate interests. We do not presently intend to invest to a significant extent in mortgages or deeds of trust, but may invest in participating mortgages if we conclude that we may benefit from the cash flow or any appreciation in the value of the property securing a mortgage.

Dispositions

Our disposition of properties is based upon management’s periodic review of our portfolio and the determination by management or our Board of Trustees that a disposition would be in our best interests.

Financing Policies

A primary objective of our financing policy has been to manage our financial position to allow us to raise capital from a variety of sources at competitive rates. Our mortgages, credit facilities and unsecured debt securities contain customary restrictions and limitations on our ability to incur indebtedness. Our charter documents do not limit the indebtedness that we may incur. Our financing strategy is to maintain a strong and flexible financial position by limiting our debt to a prudent level and minimizing our variable interest rate exposure. We intend to finance future growth with the most advantageous source of capital available to us at the time of an acquisition. These sources may include selling common stock, preferred stock, debt securities, depository shares or warrants through public offerings or private placements, utilizing availability under our unsecured revolving credit facilities or incurring additional indebtedness through secured or unsecured borrowings either or through mortgages with recourse limited to specific properties. To qualify as a REIT, we must distribute to our shareholders each year at least ninety percent of our net taxable income, excluding any net capital gain. This distribution requirement makes it unlikely that we will be able to fund future capital needs, including for acquisitions and developments, substantially from income from operations. Therefore, we expect to continue to rely on third party sources of capital to fund future capital needs.

Working Capital Reserves

We maintain working capital reserves and access to borrowings in amounts that our management determines to be adequate to meet our normal contingencies.

Policies with Respect to Other Activities

We expect to issue additional common and preferred shares of beneficial interest in the future and may authorize our Operating Partnership to issue additional common and preferred units of limited partnership interest, including to persons who contribute their interests in properties to us in exchange for such units. We have not engaged in trading, underwriting or agency distribution or sale of securities of unaffiliated issuers and we do not intend to do so. At all times, we intend to make investments consistent with our qualification as a REIT, unless because of circumstances or changes in the Internal Revenue Code of 1986, as amended (or the Treasury Regulations), our Board of Trustees determines that it is no longer in our best interests to qualify as a REIT. We may make loans to third parties, including to joint ventures in which we participate. We intend to make investments in such a way that we will not be treated as an investment company under the Investment Company Act of 1940.

Management Activities

We provide third-party real estate management services primarily through four subsidiaries (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”). BRSCO, BTRS and BPI are taxable REIT subsidiaries. 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 our Board of Trustees. The Operating Partnership owns, directly and indirectly, 100% of each of BTRS, BPI and BPM.

As of December 31, 2006, the Management Companies were managing properties containing an aggregate of approximately 42.3 million net rentable square feet, of which approximately 28.2 million net rentable square feet related to Properties owned by us and approximately 13.0 million net rentable square feet related to properties owned by third parties and unconsolidated Real Estate Ventures.

Geographic Segments

As of December 31, 2006 we were managing our portfolio within nine segments: (1) Pennsylvania—West, (2) Pennsylvania—North, (3) New Jersey, (4) Urban, (5) Richmond, Virginia, (6) California—North, (7) California—South, (8) Mid-Atlantic and (9) Southwest. The Pennsylvania—West segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs of Pennsylvania. The Pennsylvania—North segment includes properties north of Philadelphia in Berks, Bucks, Cumberland, Dauphin, Lehigh and Montgomery

counties. The New Jersey segment includes properties in counties in the southern and central part of New Jersey including Burlington, Camden and Mercer counties and in Bucks County, Pennsylvania. The Urban segment includes properties in the City of Philadelphia, Pennsylvania and the state of Delaware. The Richmond, Virginia segment includes properties primarily in Albemarle, Chesterfield and Henrico counties, the City of Richmond and Durham, North Carolina. The California—North segment includes properties in the City of Oakland and Concord. The California—South segment includes properties in the City of Carlsbad and San Diego. The Mid-Atlantic segment includes properties in Northern Virginia and the suburban Maryland. The Southwest segment includes properties in Dallas and Travis counties of Texas. Our corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period and general support functions.

Competition

The real estate business is highly competitive. Our properties compete for tenants with similar properties primarily on the basis of location, total occupancy costs (including base rent and operating expenses), services provided, and the design and condition of the improvements. We also face competition when attempting to acquire or develop real estate, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension funds, partnerships and individual investors. Additionally, our ability to compete depends upon trends in the economies of our markets, investment alternatives, financial condition and operating results of current and prospective tenants, availability and cost of capital, construction and renovation costs, land availability, completion of construction approvals, taxes, governmental regulations, legislation and population trends.

Insurance

We maintain comprehensive liability and property insurance on our properties, including for liability, fire and flood. We intend to obtain similar coverage for properties we acquire in the future. There are types of losses, generally of a catastrophic nature, such as losses from terrorism, environmental issues, floods, hurricanes or earthquakes that may be subject to limitations in certain areas. We exercise our discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to maintaining appropriate insurance on our investments at a reasonable cost and on suitable terms. If we suffer a substantial loss, our insurance coverage may not be sufficient to pay the full current market value or current replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it impractical to use insurance proceeds to fully replace or restore a property after it has been damaged or destroyed.

Employees

As of December 31, 2006, we had 599 full-time employees, including 40 union employees.

Government Regulations Relating to the Environment

Many laws and governmental regulations relating to the environment apply to us and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently and may adversely affect us.

Existing conditions at some of our Properties. Independent environmental consultants have conducted Phase I or similar environmental site assessments on all of our properties. We generally obtain these assessments prior to the acquisition of a property and may later update them as required for subsequent financing of the property or as requested by a tenant. Site assessments are generally performed to ASTM standards then existing for Phase I site assessments, and typically include a historical review, a public records review, a visual inspection of the surveyed site, and the issuance of a written report. These assessments do not generally include any soil samplings or subsurface investigations. Depending on the age of the property, the Phase I may have included an assessment of asbestos-containing materials. For properties where asbestos-containing materials were identified or suspected, an operations and maintenance plan was generally prepared and implemented. See Note 2 to our consolidated financial statements for our evaluation in accordance with FIN 47, Accounting for Conditional Asset Retirement Obligations.

Historical operations at or near some of our properties, including the operation of underground storage tanks, may have caused soil or groundwater contamination. We are not aware of any such condition, liability or concern by any other means that would give rise to material environmental liability. However, the assessments may have failed to reveal all environmental conditions, liabilities or compliance concerns; there may be material environmental

conditions, liabilities or compliance concerns that arose at a property after the review was completed; future laws, ordinances or regulations may impose material additional environmental liability; and current environmental conditions at our Properties may be affected in the future by tenants, third parties or the condition of land or operations near our Properties, such as the presence of underground storage tanks. We cannot be certain that costs of future environmental compliance will not affect our ability to make distributions to our shareholders.

Use of hazardous materials by some of our tenants. Some of our tenants handle hazardous substances and wastes on our properties as part of their routine operations. Environmental laws and regulations may subject these tenants, and potentially us, to liability resulting from such activities. We generally require our tenants, in their leases, to comply with these environmental laws and regulations and to indemnify us for any related liabilities. These tenants are primarily involved in the life sciences and the light industrial and warehouse business. We are not aware of any material noncompliance, liability or claim relating to hazardous or toxic substances or petroleum products in connection with any of our Properties, and we do not believe that on-going activities by our tenants will have a material adverse effect on our operations.

Costs related to government regulation and private litigation over environmental matters. Under environmental laws and regulations, we may be liable for the costs of removal, remediation or disposal of hazardous or toxic substances present or released on our Properties. These laws could impose liability without regard to whether we are responsible for, or knew of, the presence or release of the hazardous materials. Government investigations and remediation actions may entail substantial costs and the presence or release of hazardous substances on a property could result in governmental cleanup actions or personal injury or similar claims by private plaintiffs.

Potential environmental liabilities may exceed our environmental insurance coverage limits. We carry what we believe to be sufficient environmental insurance to cover potential liability for soil and groundwater contamination and the presence of asbestos-containing materials at the affected sites identified in our environmental site assessments. Our insurance policies are subject to conditions, qualifications and limitations. Therefore, we cannot provide any assurance that our insurance coverage will be sufficient to cover all liabilities for losses.

Other

We do not have any foreign operations and our business is not seasonal. Our operations are not dependent on a single tenant or a few tenants and no single tenant accounted for more than 10% of our total 2006 revenue.

Code of Conduct

We maintain a Code of Business Conduct and Ethics applicable to our Board and all of our officers and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions. A copy of our Code of Business Conduct and Ethics is available on our website, www.brandywinerealty.com. In addition to being accessible through our website, copies of our Code of Business Conduct and Ethics can be obtained, free of charge, upon written request to Investor Relations, 555 East Lancaster Avenue, Suite 100, Radnor, PA 19087. Any amendments to or waivers of our Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions and that relate to any matter enumerated in Item 406(b) of Regulation S-K promulgated by the SEC will be disclosed on our website.

Corporate Governance Principles and Board Committee Charters

Our Corporate Governance Principles and the charters of the Audit Committee, Compensation Committee and Corporate Governance Committee of the Board of Trustees of Brandywine Realty Trust and additional information regarding our corporate governance are available on our website, www.brandywinerealty.com. In addition to being accessible through our website, copies of our Corporate Governance Principles and charters of our Board Committees can be obtained, free of charge, upon written request to Investor Relations, 555 Lancaster Avenue, Radnor, PA 19087.

Availability of SEC Reports

We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information with the SEC. Members of the public may read and copy materials that we file with the SEC at the

SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Members of the public may also obtain information on the Public Reference Room by calling the SEC at 1-800-732-0330. The SEC also maintains an Internet web site that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. The address of that site is http://www.sec.gov. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information filed by us with the SEC are available, without charge, on our Internet web site, http://www.brandywinerealty.com, as soon as reasonably practicable after they are filed electronically with the SEC. Copies are also available, without charge, from Secretary, Brandywine Realty Trust, 555 East Lancaster Avenue, Suite 100, Radnor, PA 19087.

Item 1A. Risk Factors

Our performance is subject to risks associated with our properties and with the real estate industry.

Our economic performance and the value of our real estate assets, and consequently the value of our securities, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected. Events or conditions beyond our control that may adversely affect our operations or the value of our properties include:

	•		downturns in the national, regional and local economic climate;
	•		competition from other office, industrial and commercial buildings;
	•		local real estate market conditions, such as oversupply or reduction in demand for office, or other commercial or industrial space;
	•		changes in interest rates and availability of financing;
	•		vacancies, changes in market rental rates and the need to periodically repair, renovate and re-lease space;
	•		increased operating costs, including insurance expense, utilities, real estate taxes, state and local taxes and heightened security costs;
	•		civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts of war which may result in uninsured or underinsured losses;
	•		significant expenditures associated with each investment, such as debt service payments, real estate taxes, insurance and maintenance costs which are generally not reduced when circumstances cause a reduction in revenues from a property; and
	•		declines in the financial condition of our tenants and our ability to collect rents from our tenants.

We may experience increased operating costs, which might reduce our profitability.

Our properties are subject to increases in operating expenses such as for cleaning, electricity, heating, ventilation and air conditioning, administrative costs and other costs associated with security, landscaping and repairs and maintenance of our properties. In general, under our leases with tenants, we pass on all or a portion of these costs to them. We cannot assure you, however, that tenants will actually bear the full burden of these higher costs, or that such increased costs will not lead them, or other prospective tenants, to seek office space elsewhere. If operating expenses increase, the availability of other comparable office space in our core geographic markets might limit our ability to increase rents; if operating expenses increase without a corresponding increase in revenues, our profitability could diminish and limit our ability to make distributions to shareholders.

Our investment in property development or redevelopment may be more costly than we anticipate.

We intend to continue to develop properties where market conditions warrant such investment. Once made, these investments may not produce results in accordance with our expectations. Risks associated with our development and construction activities include:

	•		the unavailability of favorable financing alternatives in the private and public debt markets;
	•		construction costs exceeding original estimates due to rising interest rates and increases in the costs of materials and labor;
	•		construction and lease-up delays resulting in increased debt service, fixed expenses and construction or renovation costs;
	•		expenditure of funds and devotion of management’s time to projects that we do not complete;
	•		the unavailability utilities;
	•		occupancy rates and rents at newly completed properties may fluctuate depending on a number of factors, including market and economic conditions, resulting in lower than projected rental rates and a corresponding lower return on our investment; and
	•		complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other governmental permits.

We may not successfully integrate our historic operations with those of Prentiss and the intended benefits of our acquisition of Prentiss may not be realized.

Our January 2006 acquisition of Prentiss presents challenges to management, including the integration of our historic operations, properties and personnel with those of Prentiss. The acquisition also poses other risks commonly associated with similar transactions, including unanticipated liabilities, unexpected costs and the diversion of management’s attention to the integration of the operations of the combined companies. Any difficulties that our combined company encounters in the transition and integration processes, and any level of integration that is not successfully achieved, could have an adverse effect on our revenue, level of expenses and operating results. We may also experience operational interruptions or the loss of key employees, tenants and customers. As a result, notwithstanding our expectations, we may not realize any of the anticipated benefits or cost savings of the Prentiss acquisition.

We face risks associated with property acquisitions.

We have in the past acquired, and intend in the future to acquire, properties and portfolios of properties, including large portfolios, such as our acquisition of Prentiss, that would increase our size and potentially alter our capital structure. Although we believe that the acquisitions that we have completed in the past and that we expect to undertake in the future have, and will, enhance our future financial performance, the success of such transactions is subject to a number of factors, including the risk that:

	•		we may not be able to obtain financing for acquisitions on favorable terms;
	•		acquired properties may fail to perform as expected;
	•		the actual costs of repositioning or redeveloping acquired properties may be higher than our estimates;
	•		acquired properties may be located in new markets where we may have limited knowledge and understanding of the local economy, an absence of business relationships in the area or unfamiliarity with local governmental and permitting procedures; and
	•		we may not be able to efficiently integrate acquired properties, particularly portfolios of properties, into our organization and to manage new properties in a way that allows us to realize cost savings and synergies.

We have acquired in the past and in the future may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership interests in our Operating Partnership. This acquisition structure has the effect, among others, of reducing the amount of tax depreciation we can deduct over

the tax life of the acquired properties, and typically requires that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our ability to dispose of the acquired properties and/or the allocation of partnership debt to the contributors to maintain their tax bases. These restrictions on dispositions could limit our ability to sell an asset at a time, or on terms, that would be favorable absent such restrictions.

Acquired properties may subject us to unknown liabilities.

Properties that we acquire may be subject to unknown liabilities for which we would have no recourse, or only limited recourse, to the former owners of such properties. As a result, if a liability were asserted against us based upon ownership of an acquired property, we might be required to pay significant sums to settle it, which could adversely affect our financial results and cash flow. Unknown liabilities relating to acquired properties could include:

	•		liabilities for clean-up of undisclosed environmental contamination;
	•		claims by tenants, vendors or other persons arising on account of actions or omissions of the former owners of the properties; and
	•		liabilities incurred in the ordinary course of business.

We have agreed not to sell certain of our properties and to maintain indebtedness subject to guarantees.

We have agreed not to sell some of our properties for varying periods of time, in transactions that would trigger taxable income to the former owners, and we may enter into similar arrangements as a part of future property acquisitions. One of these tax protection agreements is with one of our current trustees. These agreements generally provide that we may dispose of the subject properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Internal Revenue Code or in other tax deferred transactions. Such transactions can be difficult to complete and can result in the property acquired in exchange for the disposed of property inheriting the tax attributes (including tax protection covenants) of the disposed of property. Violation of these tax protection agreements would impose significant costs on us. As a result, we are restricted with respect to decisions related to financing, encumbering, expanding or selling of these properties.

We have also entered into agreements that provide prior owners of properties with the right to guarantee specific amounts of indebtedness and, in the event that the specific indebtedness that they guarantee is repaid or reduced, we would be required to provide substitute indebtedness for them to guarantee. These agreements may hinder actions that we may otherwise desire to take to repay or refinance guaranteed indebtedness because we would be required to make payments to the beneficiaries of such agreements if we violate these agreements.

We may be unable to renew leases or re-lease space as leases expire.

If tenants do not renew their leases upon expiration, we may be unable to re-lease the space. Even if the tenants do renew their leases or if we can re-lease the space, the terms of renewal or re-leasing (including the cost of required renovations) may be less favorable than current lease terms. Certain leases grant the tenants an early termination right upon payment of a termination penalty.

We face significant competition from other real estate developers.

We compete with real estate developers, operators and institutions for tenants and acquisition and development opportunities. Some of these competitors have significantly greater financial resources than we have. Such competition may reduce the number of suitable investment opportunities available to us, may interfere with our ability to attract and retain tenants and may increase vacancies, which could result in increased supply and lower market rental rates, reducing our bargaining leverage and adversely affect our ability to improve our operating leverage. In addition, some of our competitors may be willing (because their properties may have vacancy rates higher than those for our properties) to make space available at lower prices than available space in our properties or for other reasons. We cannot assure you that this competition will not adversely affect our cash flow and our ability to make distributions to shareholders.

Changes in market conditions including capitalization rates applied in real estate acquisitions could impact our ability to grow through acquisitions.

We selectively pursue acquisitions in our core markets when long-term yields make acquisitions attractive. We compete with numerous property owners for the acquisition of real estate properties. Some of these competitors may be willing to accept lower yields on their investments impacting our ability to acquire real estate assets and thus limit our external growth. We cannot assure you that this competition will not adversely affect our cash flow and our ability to make distributions to shareholders.

Property ownership through joint ventures may limit our ability to act exclusively in our interest.

We develop and acquire properties in joint ventures with other persons or entities when we believe circumstances warrant the use of such structures. As of December 31, 2006, we had investments in eleven unconsolidated real estate ventures and four additional real estate ventures that are consolidated in our financial statements. Our investments in the eleven unconsolidated real estate ventures aggregated approximately $74.6 million (net of returns of investment amounts) as of December 31, 2006. We could become engaged in a dispute with one or more of our joint venture partners that might affect our ability to operate a jointly-owned property. Moreover, our joint venture partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives, including objectives that relate to the appropriate timing and terms of any sale or refinancing of a property. In some instances, our joint venture partners may have competing interests in our markets that could create conflicts of interest. If the objectives of our joint venture partners are inconsistent with our own objectives, we will not be able to act exclusively in our interests.

Because real estate is illiquid, we may not be able to sell properties when appropriate.

Real estate investments generally, and in particular large office and industrial properties like those that we own, often cannot be sold quickly. Consequently, we may not be able to alter our portfolio promptly in response to changes in economic or other conditions. In addition, the Internal Revenue Code limits our ability to sell properties that we have held for fewer than four years without resulting in adverse consequences to our shareholders. Furthermore, properties that we have developed and have owned for a significant period of time or that we acquired in exchange for partnership interests in our operating partnership often have a low tax basis. If we were to dispose of any of these properties in a taxable transaction, we may be required under provisions of the Internal Revenue Code applicable to REITs to distribute a significant amount of the taxable gain to our shareholders and this could, in turn, impact our cash flow. In some cases, tax protection agreements with third parties will prevent us from selling certain properties in a taxable transaction without incurring substantial costs. In addition, purchase options and rights of first refusal held by tenants or partners in joint ventures may also limit our ability to sell certain properties. All of these factors reduce our ability to respond to changes in the performance of our investments and could adversely affect our cash flow and ability to make distributions to shareholders as well as the ability of someone to purchase us, even if a purchase were in our shareholders’ best interests.

We may suffer adverse consequences due to the financial difficulties, bankruptcy or insolvency of our tenants.

If one or more of our tenants were to experience financial difficulties, including bankruptcy, insolvency or a general downturn of business, there could be an adverse effect on our financial performance and distributions to shareholders. We cannot assure you that any tenant that files for bankruptcy protection will continue to pay us rent. A bankruptcy filing by or relating to one of our tenants or a lease guarantor would bar efforts by us to collect pre-bankruptcy debts from that tenant or lease guarantor, or its property, unless we receive an order permitting us to do so from the bankruptcy court. In addition, we cannot evict a tenant solely because of bankruptcy. The bankruptcy of a tenant or lease guarantor could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. If, however, a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any such unsecured claim would only be paid to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. Restrictions under the bankruptcy laws further limit the amount of any other claims that we can make if a lease is rejected. As a result, it is likely that we would recover substantially less than the full value of any such unsecured claims that we might hold.

Some potential losses are not covered by insurance.

We currently carry comprehensive liability, fire, extended coverage and rental loss insurance on all of our properties. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, types of losses, such as lease and other contract claims and terrorism and acts of war that generally are not insured. We cannot assure you that we will be able to renew insurance coverage in an adequate amount or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts and mold, or, if offered, these types of insurance may be prohibitively expensive. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. We cannot assure you that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our cash flow and ability to make distributions to shareholders.

Terrorist attacks and other acts of violence or war may adversely impact our performance and may affect the markets on which our securities are traded.

Terrorist attacks against our properties, or against the United States or our interests, may negatively impact our operations and the value of our securities. Attacks or armed conflicts could result in increased operating costs; for example, it might cost more in the future for building security, property/casualty and liability insurance, and property maintenance. As a result of terrorist activities and other market conditions, the cost of insurance coverage for our properties could also increase. We might not be able to pass along the increased costs associated with such increased security measures and insurance to our tenants, which could reduce our profitability and cash flow. Furthermore, any terrorist attacks or armed conflicts could result in increased volatility in or damage to the United States and worldwide financial markets and economy. Such adverse economic conditions could affect the ability of our tenants to pay rent and our costs of capitals, which could have a negative impact on our results.

Our ability to make distributions is subject to various risks.

Historically, we have paid quarterly distributions to our shareholders. Our ability to make distributions in the future will depend upon:

	•		the operational and financial performance of our properties;
	•		capital expenditures with respect to existing and newly acquired properties;
	•		general and administrative costs associated with our operation as a publicly-held REIT;
	•		the amount of, and the interest rates on, our debt; and
	•		the absence of significant expenditures relating to environmental and other regulatory matters.

Certain of these matters are beyond our control and any significant difference between our expectations and actual results could have a material adverse effect on our cash flow and our ability to make distributions to shareholders.

Changes in the law may adversely affect our cash flow.

Because increases in income and service taxes are generally not passed through to tenants under leases, such increases may adversely affect our cash flow and ability to make expected distributions to shareholders. Our properties are also subject to various regulatory requirements, such as those relating to the environment, fire and safety. Our failure to comply with these requirements could result in the imposition of fines and damage awards and default under some of our tenant leases. Moreover, the costs to comply with any new or different regulations could adversely affect our cash flow and our ability to make distributions. Although we believe that our properties are in material compliance with all such requirements, we cannot assure you that these requirements will not change or that newly imposed requirements will not require significant expenditures.

The terms and covenants relating to our indebtedness could adversely impact our economic performance.

Like other real estate companies which incur debt, we are subject to risks associated with debt financing, such as the insufficiency of cash flow to meet required debt service payment obligations and the inability to refinance existing indebtedness. If our debt cannot be paid, refinanced or extended at maturity, in addition to our failure to repay our debt, we may not be able to make distributions to shareholders at expected levels or at all. Furthermore, an increase in our interest expense could adversely affect our cash flow and ability to make distributions to shareholders. If we do not meet our debt service obligations, any properties securing such indebtedness could be foreclosed on, which would have a material adverse effect on our cash flow and ability to make distributions and, depending on the number of properties foreclosed on, could threaten our continued viability.

Our credit facilities and the indenture governing our unsecured public debt securities contain (and any new or amended facility will contain) customary restrictions, requirements and other limitations on our ability to incur indebtedness, including total debt to asset ratios, secured debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt which we must maintain. Our ability to borrow under our credit facilities is (and any new or amended facility will be) subject to compliance with such financial and other covenants. In the event that we fail to satisfy these covenants, we would be in default under the credit facilities and indenture and may be required to repay such debt with capital from other sources. Under such circumstances, other sources of capital may not be available to us, or may be available only on unattractive terms.

Increases in interest rates on variable rate indebtedness would increase our interest expense, which could adversely affect our cash flow and ability to make distributions to shareholders. Rising interest rates could also restrict our ability to refinance existing debt when it matures. In addition, an increase in interest rates could decrease the amounts that third parties are willing to pay for our assets, thereby limiting our ability to alter our portfolio promptly in relation to economic or other conditions. We have entered into and may, from time to time, enter into agreements such as interest rate hedges, swaps, floors, caps and other interest rate hedging contracts with respect to a portion of our variable rate debt. Although these agreements may lessen the impact of rising interest rates on us, they also expose us to the risk that other parties to the agreements will not perform or that we cannot enforce the agreements.

Our degree of leverage could limit our ability to obtain additional financing or affect the market price of our equity shares or debt securities.

Our degree of leverage could affect our ability to obtain additional financing for working capital expenditures, development, acquisitions or other general corporate purposes. Our senior unsecured debt is currently rated investment grade by the three major rating agencies. We cannot, however, assure you that we will be able to maintain this rating. In the event that our unsecured debt is downgraded from the current rating, we would likely incur higher borrowing costs and the market prices of our common shares and debt securities might decline. Our degree of leverage could also make us more vulnerable to a downturn in business or the economy generally.

Potential liability for environmental contamination could result in substantial costs.

Under various federal, state and local laws, ordinances and regulations, we may be liable for the costs to investigate and remove or remediate hazardous or toxic substances on or in our properties, often regardless of whether we know of or are responsible for the presence of these substances. These costs may be substantial. Also, if hazardous or toxic substances are present on a property, or if we fail to properly remediate such substances, our ability to sell or rent the property or to borrow using that property as collateral may be adversely affected.

Additionally, we develop, manage, lease and/or operate various properties for third parties. Consequently, we may be considered to have been or to be an operator of these properties and, therefore, potentially liable for removal or remediation costs or other potential costs that could relate to hazardous or toxic substances.

An earthquake or other natural disasters could adversely affect our business.

Some of our properties are located in California which is a high risk geographical area for earthquakes or other natural disasters. Depending upon its magnitude, an earthquake could severely damage our properties which would adversely affect our business. We maintain earthquake insurance for our California properties and the resulting business interruption. We cannot assure you that our insurance will be sufficient if there is a major earthquake.

Americans with Disabilities Act compliance could be costly.

The Americans with Disabilities Act of 1990 (“ADA”) requires that all public accommodations and commercial facilities, including office buildings, meet certain federal requirements related to access and use by disabled persons. Compliance with ADA requirements could involve the removal of structural barriers from certain disabled persons’ entrances which could adversely affect our financial condition and results of operations. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses. Although we believe that our properties are in material compliance with present requirements, noncompliance with the ADA or similar or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against us. In addition, changes to existing requirements or enactments of new requirements could require significant expenditures. Such costs may adversely affect our cash flow and ability to make distributions to shareholders.

Our status as a REIT (or any of our REIT subsidiaries) is dependent on compliance with federal income tax requirements.

If we (or any of our REIT subsidiaries) fail to qualify as a REIT, we or the affected REIT subsidiary would be subject to federal income tax at regular corporate rates. Also, unless the IRS granted us or our affected REIT subsidiary, as the case may be, relief under certain statutory provisions, we or it would remain disqualified as a REIT for four years following the year it first failed to qualify. If we or any of our REIT subsidiaries fails to qualify as a REIT, we or they would be required to pay significant income taxes and would, therefore, have less money available for investments or for distributions to shareholders. This would likely have a material adverse effect on the value of the combined company’s securities. In addition, we or our affected REIT subsidiaries would no longer be required to make any distributions to shareholders.

Failure of the Operating Partnership (or a subsidiary partnership) to be treated as a partnership would have serious adverse consequences to our shareholders. If the IRS were to successfully challenge the tax status of the Operating Partnership or any of its subsidiary partnerships for federal income tax purposes, the Operating Partnership or the affected subsidiary partnership would be taxable as a corporation. In such event we would cease to qualify as a REIT and the imposition of a corporate tax on the Operating Partnership or a subsidiary partnership would reduce the amount of cash available for distribution from the Operating Partnership to us and ultimately to our shareholders.

Even if we qualify as a REIT, we will be required to pay certain federal, state and local taxes on our income and properties. In addition, our taxable REIT subsidiaries will be subject to federal, state and local income tax at regular corporate rates on their net taxable income derived from management, leasing and related service business. If we have net income from a prohibited transaction, such income will be subject to a 100% tax.

We face possible state and local tax audits.

Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes, but are subject to certain state and local taxes. In the normal course of business, certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits. Although we believe that we have substantial arguments in favor of our positions in the ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the specific point at issue. Collectively, tax deficiency notices received to date from the jurisdictions conducting the ongoing audits have not been material. However, there can be no assurance that future audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.

Competition for skilled personnel could increase labor costs.

We compete with various other companies in attracting and retaining qualified and skilled personnel. We depend on our ability to attract and retain skilled management personnel who are responsible for the day-to-day operations of our company. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel. We may not be able to offset such added costs by increasing the rates we charge tenants. If there is an increase in these costs or if we fail to attract and retain qualified and skilled personnel, our business and operating results could be harmed.

We are dependent upon our key personnel.

We are dependent upon our key personnel whose continued service is not guaranteed. We are dependent on our executive officers for strategic business direction and real estate experience. In connection with the acquisition of Prentiss, we entered into employment agreements with several former officers of Prentiss. Although we believe that we could find replacements for these key personnel (including the former Prentiss officers), loss of their services could adversely affect our operations.

Although we have an employment agreement with Gerard H. Sweeney, our President and Chief Executive Officer, for a term extending to February 9, 2010, this agreement does not restrict his ability to become employed by a competitor following the termination of his employment. We do not have key man life insurance coverage on our executive officers.

Certain limitations will exist with respect to a third party’s ability to acquire us or effectuate a change in control.

Limitations imposed to protect our REIT status. In order to protect us against the loss of our REIT status, our Declaration of Trust limits any shareholder from owning more than 9.8% in value of our outstanding shares, subject to certain exceptions. The ownership limit may have the effect of precluding acquisition of control of us. If anyone acquires shares in excess of the ownership limit, we may:

	•		consider the transfer to be null and void;
	•		not reflect the transaction on our books;
	•		institute legal action to stop the transaction;
	•		not pay dividends or other distributions with respect to those shares;
	•		not recognize any voting rights for those shares; and
	•		consider the shares held in trust for the benefit of a person to whom such shares may be transferred.

Limitation due to our ability to issue preferred shares. Our Declaration of Trust authorizes our Board of Trustees to cause us to issue preferred shares, without limitation as to amount and without shareholder consent. Our Board of Trustees is able to establish the preferences and rights of any preferred shares issued and these shares could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our shareholders’ best interests.

Limitation imposed by the Maryland Business Combination Law. The Maryland General Corporation Law, as applicable to Maryland REITs, establishes special restrictions against “business combinations” between a Maryland REIT and “interested shareholders” or their affiliates unless an exemption is applicable. An interested shareholder includes a person who beneficially owns, and an affiliate or associate of the trust who, at any time within the two-year period prior to the date in question, was the beneficial owner of, ten percent or more of the voting power of our then-outstanding voting shares. Among other things, Maryland law prohibits (for a period of five years) a merger and certain other transactions between a Maryland REIT and an interested shareholder unless the board of trustees had approved the transaction before the party became an interested shareholder. The five-year period runs from the most recent date on which the interested shareholder became an interested shareholder. Thereafter, any such business combination must be recommended by the board of trustees and approved by two super-majority shareholder votes unless, among other conditions, the common shareholders receive a minimum price for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for our shares or unless the board of trustees approved the transaction before the party in question became an interested shareholder. The business combination statute could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any such offers, even if the acquisition would be in our shareholders’ best interests.

Maryland Control Share Acquisition Act. Maryland law provides that “control shares” of a REIT acquired in a “control share acquisition” shall have no voting rights except to the extent approved by a vote of two-thirds of the vote eligible to be cast on the matter under the Maryland Control Share Acquisition Act. “Control Shares” means

shares that, if aggregated with all other shares previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing trustees within one of the following ranges of voting power: one-tenth or more but less than one-third, one-third or more but less than a majority or a majority or more of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions. If voting rights or control shares acquired in a control share acquisition are not approved at a shareholder’s meeting, then subject to certain conditions and limitations the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a shareholder’s meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other shareholders may exercise appraisal rights. Any control shares acquired in a control share acquisition which are not exempt under our Bylaws are subject to the Maryland Control Share Acquisition Act. Our Bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our shares. We cannot assure you that this provision will not be amended or eliminated at any time in the future.

Advance Notice Provisions for Shareholder Nominations and Proposals. Our bylaws require advance notice for shareholders to nominate persons for election as trustees at, or to bring other business before, any meeting of our shareholders. This bylaw provision limits the ability of shareholders to make nominations of persons for election as trustees or to introduce other proposals unless we are notified in a timely manner prior to the meeting.

Many factors can have an adverse effect on the market value of our securities.

A number of factors might adversely affect the price of our securities, many of which are beyond our control. These factors include:

	•		increases in market interest rates, relative to the dividend yield on our shares. If market interest rates go up, prospective purchasers of our securities may require a higher yield. Higher market interest rates would not, however, result in more funds for us to distribute and, to the contrary, would likely increase our borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market price of our common shares to go down;
	•		anticipated benefit of an investment in our securities as compared to investment in securities of companies in other industries (including benefits associated with tax treatment of dividends and distributions);
	•		perception by market professionals of REITs generally and REITs comparable to us in particular;
	•		level of institutional investor interest in our securities;
	•		relatively low trading volumes in securities of REITs;
	•		our results of operations and financial condition; and
	•		investor confidence in the stock market generally.

The market value of our common shares is based primarily upon the market’s perception of our growth potential and our current and potential future earnings and cash distributions. Consequently, our common shares may trade at prices that are higher or lower than our net asset value per common share. If our future earnings or cash distributions are less than expected, it is likely that the market price of our common shares will diminish.

Additional issuances of equity securities may be dilutive to shareholders.

The interests of our shareholders could be diluted if we issue additional equity securities to finance future developments or acquisitions or to repay indebtedness. Our Board of Trustees may authorize the issuance of additional equity securities without shareholder approval. Our ability to execute our business strategy depends upon our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including the issuance of common and preferred equity.

The issuance of preferred securities may adversely affect the rights of holders of our common shares.

Because our Board of Trustees has the power to establish the preferences and rights of each class or series of preferred shares, we may afford the holders in any series or class of preferred shares preferences, distributions, powers and rights, voting or otherwise, senior to the rights of holders of common shares. Our Board of Trustees also has the power to establish the preferences and rights of each class or series of units in Brandywine Operating Partnership, and may afford the holders in any series or class of preferred units preferences, distributions, powers and rights, voting or otherwise, senior to the rights of holders of common units.

The acquisition of new properties which lack operating history with us may give rise to difficulties in predicting revenue potential.

We will continue to acquire additional properties. These acquisitions could fail to perform in accordance with expectations. If we fail to accurately estimate occupancy levels, operating costs or costs of improvements to bring an acquired property up to the standards established for our intended market position, the performance of the property may be below expectations. Acquired properties may have characteristics or deficiencies affecting their valuation or revenue potential that we have not yet discovered. We cannot assure you that the performance of properties acquired by us will increase or be maintained under our management.

Our performance is dependent upon the economic conditions of the markets in which our properties are located.

Our properties are located in the Mid-Atlantic, Southwest, Northern California and Southern California markets. Like other real estate markets, these commercial real estate markets have experienced economic downturns in the past, and future declines in any of these economies or real estate markets could adversely affect cash available for distribution. Our financial performance and ability to make distributions to our shareholders will be particularly sensitive to the economic conditions in these markets. The local economic climate, which may be adversely impacted by business layoffs or downsizing, industry slowdowns, changing demographics and other factors, and local real estate conditions, such as oversupply of or reduced demand for office, industrial and other competing commercial properties, may affect revenues and the value of properties, including properties to be acquired or developed. We cannot assure you that these local economies will grow in the future.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

Property Acquisitions

We acquired the following properties during the year ended December 31, 2006:

Month of						# of				Rentable Square				Purchase
Acquisition		Property/Portfolio Name		Location		Buildings				Feet/ Acres				Price
														(in 000’s)
Office:
Jan-06		Prentiss Properties		Various			79				14,043,326			$	2,701,652
Feb-06		100 Lenox Drive		Lawrenceville, NJ			1				92,980				10,150
Apr-06		One Paragon Place		Richmond, VA			1				145,127				24,000
Aug-06		2340 Dulles Corner Boulevard		Herndon, VA			1				264,405				79,000
Aug-06		2355 Dulles Corner Boulevard		Herndon, VA			1				179,176				55,000
Nov-06		2251 Corporate Park Drive		Herndon, VA			1				158,016				59,000
		Total Office Properties Acquired					84				14,883,030			$	2,928,802
Land Parcels:
Mar-06		101-103 Juniper Street (parking garage)		Philadelphia, PA							—			$	2,250
Apr-06		Bishops Gate South		Mount Laurel, NJ							47.9				6,700
Apr-06		Gradyville Road		Newtown (Delaware County), PA							5.5				1,900
Jun-06		West Creek Land		Goochland County, VA							23.2				4,636
Oct-06		Rob Roy Land		Austin, TX							16.8				2,475
		Total Land Acquired									93.4			$	17,961

The purchase prices above do not include transaction costs, excluding the Prentiss properties.

Development Properties Placed in Service

We placed in service the following properties during the year ended December 31, 2006:

Month Placed

# of

Rentable

in Service

Property/Portfolio Name

Location

Buildings

Square Feet

Office:

Nov-06

Cira Centre

Philadelphia, PA

1

731,852

Dec-06

855 Springdale Drive

West Whiteland, PA

1

52,500

Total Properties Placed in Service

2

784,352

We place a property under development in service once a property reaches 95% occupancy or one year after the completion of shell construction, whichever is earlier.

Property Sales

We sold the following properties during the year ended December 31, 2006:

Month of						# of				Rentable Square				Sales
Sale		Property/Portfolio Name		Location		Bldgs.				Feet/ Acres				Price
														(in 000’s)
Office:
Jan-06		850/950 Warrenville Road		Chicago, IL			2				99,470			$	15,250
Feb-06		550/650 Warrenville Road		Chicago, IL			2				169,115				22,250
Feb-06		1050 Warrenville Road		Chicago, IL			1				53,982				3,500
Feb-06		701 Warrenville Road		Chicago, IL			1				68,046				9,500
Feb-06		801 Cherry Street		Fort Worth, TX			1				1,025,601				172,000
Mar-06		8755 W. Higgins Road		Chicago, IL			1				237,320				30,000
Jun-06		505 Millenium Drive		Allen, TX			1				98,586				5,943
Jul-06		110 Summit Drive		Exton, PA			1				43,660				3,690
Aug-06		8144 Walnut Hill Lane		Dallas, TX			1				464,470				63,300
Aug-06		111 Presidential Boulevard		Bala Cynwyd, PA			1				172,894				34,868
Aug-06		2200 Cabot Drive		Lisle, IL			1				124,327				24,250
Nov-06		King & Harvard Drive		Cherry Hill, NJ			1				67,444				6,600
Nov-06		One South Union Avenue		Cherry Hill, NJ			1				99,573				11,000
Nov-06		1255 Corporate Drive		Irving, TX			1				150,019				20,200
Dec-06		2110 Walnut Hill Lane		Irving, TX			3				164,782				11,825
Dec-06		105/140 Terry Drive		Newtown (Bucks County), PA			2				128,666				16,150
Dec-06		3890 West Northwest Highway		Dallas, TX			1				126,132				11,000
Dec-06		3860 West Northwest Highway		Dallas, TX			1				70,128				6,000
		Total Office Properties Sold					23				3,364,215			$	467,326
Land Parcels:
Apr-06		Radnor Chester Road		Radnor, PA							1.3			$	4,500
Jun-06		Highland Drive		Westampton, NJ							5.5				427
Aug-06		Natomas Land		Sacramento, CA							10.9				5,223
Dec-06		Newtown Land		Newtown (Bucks County), PA							59.0				19,000
		Total Land Sold									76.7			$	29,150

Properties

As of December 31, 2006, we owned 261 office properties, 23 industrial facilities and one mixed-use property that contain an aggregate of approximately 28.2 million net rentable square feet. We also have 6 properties under development, 3 properties under redevelopment and 4 lease-up properties containing an aggregate 2.1 million net rentable square feet. The properties are located in and surrounding Philadelphia, Wilmington, Southern and Central New Jersey, Richmond, Metropolitan Washington, D.C., Dallas/Fort Worth, Austin, Oakland, San Diego and Los Angeles. As of December 31, 2006, the Properties were approximately 91.5% occupied by 1,623 tenants and had an average age of approximately 17.8 years. The office properties are primarily two to three story suburban office buildings containing an average of approximately 108,019 net rentable square feet. The industrial properties accommodate a variety of tenant uses, including light manufacturing, assembly, distribution and warehousing. We carry comprehensive liability, fire, extended coverage and rental loss insurance covering all of the Properties, with policy specifications and insured limits which we believe are adequate.

We had the following projects in development or redevelopment as of December 31, 2006:

								%
								Leased				Projected
				Rentable				as of				In-Service
Project Name		Location		Square Feet				12/31/06				Date (a)
Under Development:
Three Paragon		Richmond, VA			72,561				71	%		Jun-07
Metroplex		Plymouth Meeting, PA			120,877				0	%		Apr-08
1200 Lenox Drive		Lawrenceville, NJ			71,250				0	%		Apr-08
Park on Barton Creek		Austin, TX			213,255				0	%		Jun-08
2150 Franklin		Oakland, CA			215,000				0	%		Oct-08
South Lake at Dulles		Herndon, VA			267,350				0	%		Aug-08
					960,293
Under Redevelopment:
555 East Lancaster Avenue		Radnor, PA			242,032				92	%(b)		May-07
500 Office Center Drive		Fort Washington, PA			104,303				36	%		Oct-07
100 Lenox Drive		Lawrenceville, NJ			92,980				0	%		May-08
					439,315
					1,399,608

As of December 31, 2006, the above nine projects accounted for $141.2 million of the $217.9 million of construction in process on our consolidated balance sheet.

As of December 31, 2006, we expect our total investment in these nine projects, including an estimate of the tenant improvement costs, to be approximately $304.3 million.

The following table sets forth information with respect to our operating properties at December 31, 2006:

																						Average
																		Total Base Rent				Annualized
										Net				Percentage				for the Twelve				Rental Rate
								Year		Rentable				Leased as of				Months Ended				as of
								Built/		Square				December 31,				December 31,				December 31,
Property Name				Location		State		Renovated		Feet				2006 (a)				2006 (b) (000’s)				2006 (c)
CALIFORNIA NORTH SEGMENT
1 Kaiser Plaza				Oakland		CA		1970			530,887				98.1	%		$	16,028			$	34.34
2101 Webster Street				Oakland		CA		1985			464,424				93.2	%			11,538				29.01
1901 Harrison Street				Oakland		CA		1985			272,100				95.3	%			7,565				32.05
1220 Concord Avenue				Concord		CA		1984			175,153				100.0	%			2,944				22.06
1200 Concord Avenue				Concord		CA		1984			175,103				100.0	%			4,161				24.47
MID-ATLANTIC REGION SEGMENT
7101 Wisconsin Avenue				Bethesda		MD		1975			223,054				76.1	%			4,640				21.88
6600 Rockledge Drive		(d)		Bethesda		MD		1981			156,325				100.0	%			4,993				36.27
2273 Research Boulevard				Rockville		MD		1999			147,689				85.0	%			2,751				24.53
2275 Research Boulevard				Rockville		MD		1990			147,267				91.2	%			2,993				23.17
2277 Research Boulevard				Rockville		MD		1986			137,045				100.0	%			3,012				24.29
11720 Beltsville Drive				Beltsville		MD		1987			132,252				58.8	%			875				17.72
7735 Old Georgetown Road				Bethesda		MD		1964/1997			124,480				98.4	%			3,233				30.38
11700 Beltsville Drive				Beltsville		MD		1981			95,983				71.1	%			1,517				21.75
11710 Beltsville Drive				Beltsville		MD		1987			77,869				80.0	%			1,586				25.05
11740 Beltsville Drive				Beltsville		MD		1987			6,783				100.0	%			160				26.41
1676 International Drive				McLean		VA		1999			299,413				100.0	%			9,152				31.59
2340 Dulles Corner Boulevard				Herndon		VA		1987			264,405				96.8	%			2,443				26.04
1900 Gallows Road				Vienna		VA		1989			202,684				100.0	%			4,244				23.65
3130 Fairview Park Drive				Falls Church		VA		1999			183,111				72.4	%			5,213				30.96
3141 Fairview Park Drive				Falls Church		VA		1988			180,041				92.9	%			3,886				24.36
2355 Dulles Corner Boulevard				Herndon		VA		1988			179,074				98.7	%			1,311				15.63
2411 Dulles Corner Park				Herndon		VA		1990			177,072				95.4	%			5,078				30.10
1880 Campus Commons Drive				Reston		VA		1985			172,448				100.0	%			3,110				19.78
2121 Cooperative Way				Herndon		VA		2000			161,274				100.0	%			4,435				27.74
8260 Greensboro Drive				McLean		VA		1980			161,229				93.3	%			3,667				25.03
2251 Corporate Park Drive				Herndon		VA		2000			158,016				100.0	%			664				32.93
13880 Dulles Corner Lane				Herndon		VA		1997			151,747				100.0	%			4,686				30.83
8521 Leesburg Pike				Vienna		VA		1984			150,919				92.2	%			3,161				24.54
12015 Lee Jackson Memorial Highway				Fairfax		VA		1985			150,432				92.7	%			3,335				24.52
2201 Cooperative Way				Herndon		VA		1990			138,545				100.0	%			3,829				28.41
11781 Lee Jackson Memorial Highway				Fairfax		VA		1982			127,227				96.8	%			3,048				24.26
13825 Sunrise Valley Drive				Herndon		VA		1989			104,466				100.0	%			2,484				24.67
4401 Fair Lakes Court				Fairfax		VA		1988			55,972				98.7	%			1,573				24.13
PENNSYLVANIA NORTH SEGMENT
100-300 Gundy Drive				Reading		PA		1970			452,902				100.0	%			7,222				15.64
401 Plymouth Road				Plymouth Meeting		PA		2001			201,528				100.0	%			5,880				27.08
300 Corporate Center Drive				Camp Hill		PA		1989			175,280				91.3	%			1,920				10.23
7535 Windsor Drive				Allentown		PA		1988/2004			132,375				76.0	%			1,372				16.01
100 Kachel Blvd				Reading		PA		1970			131,082				100.0	%			2,960				21.45
501 Office Center Drive				Fort Washington		PA		1974/2005			114,795				98.0	%			2,340				20.83
7130 Ambassador Drive		(f)		Allentown		PA		1991			114,049				100.0	%			430				3.76
7350 Tilghman Street				Allentown		PA		1987			111,500				100.0	%			1,983				20.11
7450 Tilghman Street				Allentown		PA		1986			100,000				100.0	%			1,545				18.02

																						Average
																		Total Base Rent				Annualized
										Net				Percentage				for the Twelve				Rental Rate
								Year		Rentable				Leased as of				Months Ended				as of
								Built/		Square				December 31,				December 31,				December 31,
Property Name				Location		State		Renovated		Feet				2006 (a)				2006 (b) (000’s)				2006 (c)
620 West Germantown Pike				Plymouth Meeting		PA		1990			90,175				89.3	%			1,772				27.91
610 West Germantown Pike				Plymouth Meeting		PA		1987			90,152				100.0	%			2,406				30.12
630 West Germantown Pike				Plymouth Meeting		PA		1988			89,925				88.8	%			1,768				24.05
600 West Germantown Pike				Plymouth Meeting		PA		1986			89,681				97.4	%			2,237				20.77
3331 Street Road -Greenwood Square				Bensalem		PA		1986			81,575				98.8	%			1,447				20.45
One Progress Drive				Horsham		PA		1986			79,204				100.0	%			848				13.40
323 Norristown Road				Lower Gwyned		PA		1988			76,287				100.0	%			1,447				19.16
160 - 180 West Germantown Pike				East Norriton		PA		1982			73,394				69.4	%			902				17.15
500 Enterprise Road				Horsham		PA		1990			66,751				100.0	%			506				13.53
925 Harvest Drive				Blue Bell		PA		1990			62,957				100.0	%			1,060				19.22
980 Harvest Drive				Blue Bell		PA		1988			62,379				100.0	%			1,317				21.32
3329 Street Road -Greenwood Square				Bensalem		PA		1985			60,705				100.0	%			1,146				21.02
200 Corporate Center Drive				Camp Hill		PA		1989			60,000				100.0	%			1,051				17.23
321 Norristown Road				Lower Gwyned		PA		1971			59,994				95.0	%			1,056				19.22
520 Virginia Drive				Fort Washington		PA		1987			56,454				100.0	%			—				—
910 Harvest Drive				Blue Bell		PA		1990			52,611				100.0	%			704				13.72
2240/50 Butler Pike				Plymouth Meeting		PA		1984			52,229				100.0	%			1,119				20.96
920 Harvest Drive				Blue Bell		PA		1990			51,894				77.8	%			554				17.71
1155 Business Center Drive				Horsham		PA		1990			51,388				94.2	%			803				18.55
800 Business Center Drive				Horsham		PA		1986			51,236				100.0	%			598				15.71
7150 Windsor Drive				Allentown		PA		1988			49,420				100.0	%			542				14.41
6575 Snowdrift Road				Allentown		PA		1988			47,091				100.0	%			396				13.31
220 Commerce Drive				Fort Washington		PA		1985			46,080				94.5	%			794				21.39
6990 Snowdrift Road (A)				Allentown		PA		2003			44,200				100.0	%			763				18.30
7248 Tilghman Street				Allentown		PA		1987			43,782				73.2	%			535				17.56
7360 Windsor Drive				Allentown		PA		2001			43,600				100.0	%			935				24.41
300 Welsh Road — Building I				Horsham		PA		1980			40,042				100.0	%			679				18.65
7310 Tilghman Street				Allentown		PA		1985			40,000				83.5	%			472				17.73
150 Corporate Center Drive				Camp Hill		PA		1987			39,401				94.1	%			703				18.84
755 Business Center Drive				Horsham		PA		1998			38,050				100.0	%			576				24.98
7010 Snowdrift Road				Allentown		PA		1991			33,029				60.5	%			145				15.67
2260 Butler Pike				Plymouth Meeting		PA		1984			31,892				100.0	%			654				14.59
700 Business Center Drive				Horsham		PA		1986			30,773				100.0	%			434				14.78
120 West Germantown Pike				Plymouth Meeting		PA		1984			30,574				100.0	%			562				20.10
650 Dresher Road				Horsham		PA		1984			30,071				100.0	%			684				23.71
655 Business Center Drive				Horsham		PA		1997			29,849				94.3	%			399				19.70
630 Dresher Road				Horsham		PA		1987			28,894				100.0	%			717				25.95
6990 Snowdrift Road (B)				Allentown		PA		2004			27,900				100.0	%			401				17.71
140 West Germantown Pike				Plymouth Meeting		PA		1984			25,357				100.0	%			488				23.09
3333 Street Road -Greenwood Square				Bensalem		PA		1988			25,000				100.0	%			539				23.89
800 Corporate Circle Drive				Harrisburg		PA		1979			24,862				49.7	%			197				17.80
500 Nationwide Drive				Harrisburg		PA		1977			18,027				75.5	%			211				18.85
600 Corporate Circle Drive				Harrisburg		PA		1978			17,858				100.0	%			287				18.41
300 Welsh Road — Building II				Horsham		PA		1980			17,750				100.0	%			333				17.29
2404 Park Drive				Harrisburg		PA		1983			11,000				100.0	%			215				19.00
2401 Park Drive				Harrisburg		PA		1984			10,074				100.0	%			183				18.74

																						Average
																		Total Base Rent				Annualized
										Net				Percentage				for the Twelve				Rental Rate
								Year		Rentable				Leased as of				Months Ended				as of
								Built/		Square				December 31,				December 31,				December 31,
Property Name				Location		State		Renovated		Feet				2006 (a)				2006 (b) (000’s)				2006 (c)
George Kachel Farmhouse				Reading		PA		2000			1,664				0.0	%			—				—
PENNSYLVANIA WEST SEGMENT
101 West Elm Street				W. Conshohocken		PA		1999			185,774				77.2	%			3,371				25.18
One Radnor Corporate Center				Radnor		PA		1998			185,166				65.9	%			4,743				31.86
Four Radnor Corporate Center				Radnor		PA		1995			165,138				78.5	%			2,988				21.02
Five Radnor Corporate Center				Radnor		PA		1998			164,577				91.9	%			4,755				32.70
751-761 Fifth Avenue				King Of Prussia		PA		1967			158,000				100.0	%			532				3.39
630 Allendale Road				King of Prussia		PA		2000			150,000				100.0	%			3,722				25.40
640 Freedom Business Center		(d)		King Of Prussia		PA		1991			132,000				84.1	%			2,796				25.65
52 Swedesford Square				East Whiteland Twp.		PA		1988			131,017				100.0	%			2,677				21.18
400 Berwyn Park				Berwyn		PA		1999			124,182				100.0	%			3,256				26.72
Three Radnor Corporate Center				Radnor		PA		1998			119,194				80.0	%			2,635				28.38
101 Lindenwood Drive				Malvern		PA		1988			118,121				100.0	%			2,114				19.36
300 Berwyn Park				Berwyn		PA		1989			109,919				98.8	%			2,180				24.12
442 Creamery Way		(f)		Exton		PA		1991			104,500				100.0	%			598				6.28
Two Radnor Corporate Center				Radnor		PA		1998			100,973				69.0	%			2,156				30.10
301 Lindenwood Drive				Malvern		PA		1984			97,813				99.3	%			1,766				18.63
1 West Elm Street				W. Conshohocken		PA		1999			97,737				100.0	%			2,744				28.44
555 Croton Road				King of Prussia		PA		1999			96,909				100.0	%			2,696				29.74
500 North Gulph Road				King Of Prussia		PA		1979			93,082				80.8	%			2,184				19.09
630 Freedom Business Center		(d)		King Of Prussia		PA		1989			86,683				97.0	%			1,986				25.71
620 Freedom Business Center		(d)		King Of Prussia		PA		1986			86,570				100.0	%			1,569				16.93
1200 Swedsford Road				Berwyn		PA		1994			86,000				100.0	%			2,111				26.99
595 East Swedesford Road				Wayne		PA		1998			81,890				100.0	%			1,573				21.35
1050 Westlakes Drive				Berwyn		PA		1984			80,000				100.0	%			719				—
1060 First Avenue				King Of Prussia		PA		1987			77,718				90.6	%			1,380				22.03
741 First Avenue				King Of Prussia		PA		1966			77,184				100.0	%			580				8.85
1040 First Avenue				King Of Prussia		PA		1985			75,488				93.6	%			1,321				21.97
200 Berwyn Park				Berwyn		PA		1987			75,025				100.0	%			1,574				23.40
1020 First Avenue				King Of Prussia		PA		1984			74,556				100.0	%			1,639				23.37
1000 First Avenue				King Of Prussia		PA		1980			74,139				56.8	%			921				23.38
436 Creamery Way				Exton		PA		1991			72,300				87.8	%			616				13.53
14 Campus Boulevard				Newtown Square		PA		1998			69,542				100.0	%			1,466				25.83
575 East Swedesford Road				Wayne		PA		1985			66,265				100.0	%			1,251				21.43
429 Creamery Way				Exton		PA		1996			63,420				100.0	%			777				14.94
610 Freedom Business Center		(d)		King Of Prussia		PA		1985			62,991				100.0	%			1,420				26.90
426 Lancaster Avenue				Devon		PA		1990			61,102				100.0	%			1,213				17.63
1180 Swedesford Road				Berwyn		PA		1987			60,371				100.0	%			1,847				32.05
1160 Swedesford Road				Berwyn		PA		1986			60,099				100.0	%			1,413				24.49
100 Berwyn Park				Berwyn		PA		1986			57,731				98.0	%			1,087				22.66
440 Creamery Way				Exton		PA		1991			57,218				100.0	%			446				7.78
640 Allendale Road		(f)		King of Prussia		PA		2000			56,034				100.0	%			350				7.83
565 East Swedesford Road				Wayne		PA		1984			55,979				100.0	%			1,010				19.95
650 Park Avenue				King Of Prussia		PA		1968			54,338				97.1	%			796				15.36
855 Springdale Drive				Exton		PA		1986			53,500				33.3	%			44				—

																						Average
																		Total Base Rent				Annualized
										Net				Percentage				for the Twelve				Rental Rate
								Year		Rentable				Leased as of				Months Ended				as of
								Built/		Square				December 31,				December 31,				December 31,
Property Name				Location		State		Renovated		Feet				2006 (a)				2006 (b) (000’s)				2006 (c)
680 Allendale Road				King Of Prussia		PA		1962			52,528				100.0	%			544				13.34
486 Thomas Jones Way				Exton		PA		1990			51,372				81.6	%			677				19.83
660 Allendale Road		(f)		King of Prussia		PA		1962			50,635				100.0	%			365				9.17
875 First Avenue				King of Prussia		PA		1966			50,000				100.0	%			1,038				21.15
630 Clark Avenue				King of Prussia		PA		1960			50,000				100.0	%			301				7.36
620 Allendale Road				King of Prussia		PA		1961			50,000				100.0	%			978				21.38
15 Campus Boulevard				Newtown Square		PA		2002			49,621				100.0	%			991				21.56
479 Thomas Jones Way				Exton		PA		1988			49,264				100.0	%			765				17.30
17 Campus Boulevard				Newtown Square		PA		2001			48,565				100.0	%			1,224				28.52
11 Campus Boulevard				Newtown Square		PA		1998			47,700				100.0	%			1,064				18.64
456 Creamery Way				Exton		PA		1987			47,604				100.0	%			364				7.89
585 East Swedesford Road				Wayne		PA		1998			43,683				100.0	%			1,018				24.76
1100 Cassett Road				Berwyn		PA		1997			43,480				100.0	%			1,106				29.65
467 Creamery Way				Exton		PA		1988			42,000				100.0	%			554				18.20
1336 Enterprise Drive				West Goshen		PA		1989			39,330				100.0	%			796				22.43
600 Park Avenue				King of Prussia		PA		1964			39,000				100.0	%			536				15.02
412 Creamery Way				Exton		PA		1999			38,098				77.3	%			677				23.33
18 Campus Boulevard				Newtown Square		PA		1990			37,374				52.6	%			740				21.94
457 Creamery Way				Exton		PA		1990			36,019				100.0	%			386				14.70
100 Arrandale Boulevard				Exton		PA		1997			34,931				100.0	%			550				20.01
300 Lindenwood Drive				Malvern		PA		1991			33,000				0.0	%			376				—
468 Thomas Jones Way				Exton		PA		1990			28,934				100.0	%			483				18.00
1700 Paoli Pike				Malvern		PA		2000			28,000				100.0	%			504				20.65
2490 Boulevard of the Generals				King of Prussia		PA		1975			20,600				100.0	%			434				20.77
481 John Young Way				Exton		PA		1997			19,275				100.0	%			405				22.50
100 Lindenwood Drive				Malvern		PA		1985			18,400				100.0	%			319				19.79
748 Springdale Drive				Exton		PA		1986			13,950				77.7	%			209				18.62
200 Lindenwood Drive				Malvern		PA		1984			12,600				65.3	%			148				18.39
111 Arrandale Road				Exton		PA		1996			10,479				100.0	%			196				17.76
NEW JERSEY SEGMENT
50 East State Street				Trenton		NJ		1989			305,884				91.3	%			5,278				29.88
1009 Lenox Drive				Lawrenceville		NJ		1989			180,460				89.8	%			3,777				28.42
10000 Midlantic Drive				Mt. Laurel		NJ		1990			179,098				90.0	%			2,727				22.82
33 West State Street				Trenton		NJ		1988			167,774				99.6	%			2,987				31.17
525 Lincoln Drive West				Marlton		NJ		1986			165,956				96.7	%			2,562				20.28
Main Street — Plaza 1000				Voorhees		NJ		1988			162,364				94.6	%			3,247				24.44
457 Haddonfield Road				Cherry Hill		NJ		1990			121,737				100.0	%			2,689				24.13
2000 Midlantic Drive				Mt. Laurel		NJ		1989			121,658				100.0	%			2,022				24.06
700 East Gate Drive				Mt. Laurel		NJ		1984			119,272				79.2	%			2,061				24.45
2000 Lenox Drive				Lawrenceville		NJ		2000			119,114				100.0	%			3,208				30.57
989 Lenox Drive				Lawrenceville		NJ		1984			112,055				91.3	%			2,734				30.46
993 Lenox Drive				Lawrenceville		NJ		1985			111,124				100.0	%			2,882				29.00
1000 Howard Boulevard				Mt. Laurel		NJ		1988			105,312				100.0	%			1,934				22.85
100 Brandywine Boulevard				Newtown		PA		2002			102,000				100.0	%			2,681				25.73
997 Lenox Drive				Lawrenceville		NJ		1987			97,277				100.0	%			2,387				27.27
1000 Atrium Way				Mt. Laurel		NJ		1989			97,158				47.7	%			1,020				21.48