Brandywine Realty Trust (BDN) 2002 Q1 法說會逐字稿

GOOD DAY, LADIES AND GENTLEMEN. WELCOME TO THE BRANDYWINE REALTY TRUST FIRST QUARTER EARNINGS RELEASE. AT THIS TIME, ALL PARTICIPANTS ARE IN A LISTEN-ONLY MODE. LATER WE WILL CONDUCT A QUESTION-AND-ANSWER SESSION AND INSTRUCTION WILL FOLLOW AT THAT TIME. AS A REMINDER, THIS CONFERENCE CALL IS BEING RECORDED. I WOULD NOW LIKE TO INTRODUCE YOUR HOST FOR TODAY'S CONFERENCE, MR. GERRY SWEENEY, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF BRANDYWINE REALTY TRUST. PLEASE GO AHEAD, SIR.

JASON, THANK YOU VERY MUCH. AND THANK YOU ALL FOR JOINING US TO REVIEW OUR FIRST QUARTER EARNINGS CALL AND AN UPDATE ON OUR BUSINESS PLAN. HERE'S A DISCLAIMER. THE INFORMATION TO BE DISCUSSED IN THIS EARNINGS CONFERENCE CALL MAY CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ALTHOUGH WE BELIEVE THE EXPECTATIONS REFLECT THAT SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF RESULTS AND NO ASSURANCES CAN BE GIVING THAT THE EXPECTED RESULTS WILL BE DELIVERED. FORWARD-LOOKING STATEMENTS ] SUCH FORWARD-LOOKING STATEMENTS AND ALL OTHER STATEMENTS THAT ARE MADE ON THIS EARNINGS CONFERENCE CALL THAT ARE NOT HISTORICAL FAX ARE SUBJECT TO RISKS AND UNCERTAINTIES TO CAUSE ACTUAL RESULTS TO DIFFER FROM THOSE EXPECTED. AMONG THE RISKS ARE RISKS WE HAVE IDENTIFIED IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001, AND A COPY WHICH IS ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION. FOR FURTHER INFORMATION ON FACTS THAT COULD IMPACT US, REFERENCE IS MADE TO OUR ADDITIONAL FILINGS WITH THE FCC. WE ARE SUBJECT TO THE REPORTING REQUIREMENTS OF THE SECURITIES AND EXCHANGE COMMISSION AND UNDERTAKE NO RESPONSIBILITY TO UPDATE OR SUPPLEMENT INFORMATION DISCUSSED ON THIS CONFERENCE CALL THAT SUBSEQUENTLY BECOMES UNTRUE. TODAY'S AGENDA WILL PROVIDE IN ADDITION TO OUR FIRST QUARTER REVIEW AND BUSINESS PLAN UP DATE AN OVERVIEW OF MARKET CONDITIONS. PARTICIPATING WITH ME IN TODAY'S CALL ARE JEFF DeVUONO, SENIOR VICE PRESIDENT OF OPERATIONS, OUR SENIOR VICE PRESIDENT OF INVESTMENTS, BRAD HARRIS OUR CHIEF ACCOUNTING OFFICER AND OUR CORPORATE CONTROLLER AND HEAD OF FINANCIAL REPORTING. OUR DISCUSSION TODAY WILL HOPEFULLY LEAVE WITH YOU A CLEARER UNDERSTANDING OF THE CONDITIONS IN OUR CORE SUBURBAN OFFICE MARKETS AND PROVIDE INSIGHT INTO OUR MARKETING AND INVESTMENT STRATEGIES. AS JEFF WILL GO INTO, MARKET CONDITIONS REMAIN CHALLENGING. DESPITE TODAY'S STRONG GDP RESULTS, THERE IS NO NEED TO SUGAR-COAT THE NEGATIVE IMPACT THAT CORPORATE CUTBACKS IN CAPITAL SPENDING, LAYOFFS, DOWNSIZING AND CREDIT ISSUES HAVE HAD ON BOTH THE REGIONAL ECONOMY AS WELL AS THE OVERALL DEMAND FOR OFFICE SPACE. IN SOME submarkets WE HAVE CLEARLY SEEN A PLATEAUING OF RENTS AND AS DISCUSSED ON THE PREVIOUS CALLS, ON SELECTED TRANSACTIONS DECLINING RENTAL RATES AND INCREASED CONCESSION PACKAGES. WE CONTINUE TO MAINTAIN A VERY AGIVES MARKETING STANCE IN MAKING SURE WE MAKE OF POSSIBLE LEASE TRANSACTION AND THINK AS YOU'LL HEAR LATER, OUR LEASING ACTIVITY BEARS THAT OUT. I HAVE TALKED ON PREVIOUS CALLS ABOUT OUR LEASE AND DON'T REPENT STRATEGY OF MAKING EVERY DEAL ON THE BEST ECONOMIC TERMS POSSIBLE. THAT PROCESS CONTINUES AND WE ARE DELIGHTED THAT WE CONTINUE TO OUTPERFORM THE MARKETPLACE IN TERMS OF ECONOMIC OCCUPANCY, EFFECTIVE RENTAL RATES, AND KEEPING A CAP ON CAPITAL COSTS AND LEASING COMMISSIONS. EVERY MAJOR DEAL IS EVALUATED, THOUGHT THROUGH, REVIEWED AND KICKED AROUND PRIOR TO THE GO-NO DECISION BEING MADE. WE HAVE MADE NUMEROUS TRANSACTIONS AS THE NUMBERS CERTAINLY BEAR OUT. THERE HAVE ALSO BEEN SOME INSTANCES, HOWEVER, WHERE TENANT REQUIREMENTS WERE SUCH THAT THE DEALS DIDN'T MAKE SENSE. AS DIFFICULT AS THE MARKET IS, I DON'T BELIEVE THAT WE ARE AT A SUNK COST PHASE WHERE WE NEED TO MAKE EVERY DEAL ON ANY TERMS. OUR MARKETING STANCE IS NONETHELESS VERY AGGRESSIVE, DYNAMICS HAVE CLEARLY SHIFTED TO THE TENANT. WE RECOGNIZE THAT. AND THE CHALLENGE IS REALLY TO ACCOMPLISH SEVERAL OBJECTIVES. FIRST, TO MAKE SURE THAT WE SEE EVERY DEAL IN THE MARKETPLACE. WE DO. NEXT, TO MAKE SURE WE FULLY UNDERSTAND ALL SUBMARKET DYNAMICS AND THE TENANT SPACE OPTIONS. THAT'S MISSION NO. 1 AND WE ACCOMPLISH IT EVERY DAY. THEN WE MAKE SURE THAT WE HAVE THE STRONGEST MOST AGGRESSIVE MARKETING TEAM WE CAN. OUR TEAM IS EXCELLENT. I'M PROUD OF THE WORK THEY HAVE ACCOMPLISHED AND WE ALL REVEL IN THEIR SUCCESSES OVER THE LAST SEVERAL QUARTERS. FINALLY, WE UNDERSTAND OUR COMPETITORS. WE CLEARLY DO THAT. WE KNOW THEIR INVENTORY SOMETIMES BETTER THAN THEY DO. WE KNOW THE STRENGTHS AND WEAKNESSES AND OBVIOUSLY FACTOR THAT INTO OUR THOUGHT PROCESS. AS JEFF WILL TOUCH ON, WE CONTINUE TO SEE GOOD LEVELS OF ACTIVITY THROUGH THE PORTFOLIO. WE HAVE NOT, HOWEVER, SEEN A SIGNIFICANT CONTRACTION IN DECISION-MAKING TIMES OR FRANKLY ANY REAL SENSE OF URGENCY ON THE PART OF ANY TONIGHT TO MAKE A RELEASE OF LEASING DECISION. MARKET DYNAMICS AS I MENTIONED ARE STILL SHIFTED TOWARDS THE TENANT. IN ADDITION TO BEING VERY PRICE-COMPETITIVE, OUR EXTENSIVE INVENTORY HAS SERVED US VERY WELL IN PROVIDING SPACE FLEXIBILITY AND A FULL ARRAY OF SPACE OPTIONS TO BOTH CURRENT AND PROSPECTIVE TENANTS AND IT'S NOT ALWAYS JUST ABOUT PRICE. THE FIRST QUARTER WAS A VERY GOOD ONE FOR THE COMPANY. OUR ACTUAL REVENUES TRACKED AND EVEN SLIGHTLY EXCEEDED OUR BUDGET. EXPENSES STAYED VERY MUCH IN LINE WITH OUR FORECAST. WE POSTED FFO OF 68 CENTS WHICH EXCEEDED FIRST CALL ESTIMATES BY 3 CENTS FOR AN 8% OVERALL INCREASE SINCE LAST YEAR. AS BRAD WILL TOUCH ON, THE PRIMARY DRIVERS FOR THIS WERE OUR REVENUES MEETING OUR TARGETS COUPLED WITH SOME LEASE TERMINATION FEES AND SOME OTHER ITEMS. FROM A BENCHMARKING STANDPOINT, WE ARE DELIGHTED THAT OUR TENANT RETENTION RATE EXCEEDED OUR 80% STRETCH GOAL AND OUR 75% TARGET. WE CONTINUE TO PRESS ON ALL FRONTS TO ENSURE THAT OUR TENANT RETENTION RATE STAYS AT THE VERY HIGHEST RANGE IN OUR INDUSTRY. YOU CAN CLEARLY SEE THE IMPACT OF MARKET CONDITIONS ON BOTH OUR RENEWAL AND NEW LEASE GROWTH RATES. THEY ARE VERY POSITIVE. ACTUALLY, NICELY POSITIVE. BUT DOWN FROM OUR HISTORICAL TREND LINES. TO BE QUITE HONEST, EVEN THOUGH THEY ARE BELOW THOSE AVERAGES, WE ARE DELIGHTED WITH THE POSITIVE AMOUNT THAT WE HAVE BEEN ABLE TO ACHIEVE THAT COMBINED WITH THE CAPITAL COST SCENARIO AND THE PERCENTAGE OF DIRECT LEASE TRANSACTIONS HAVE CREATED A SITUATION WHERE OUR EFFECTIVE RENTS HAVE REMAINED IN LINE WITH OUR PROJECTIONS. BY WAY OF COMPARISON, FOR THE FIRST QUARTER OF '01, WE SPENT AN AVERAGE COST PER-SQUARE-FOOT IN BOTH T.I. AND LEASING COMMISSIONS OF $4.60 A FOOT. THAT HAS GONE DOWN TO $4.32 A FOOT, A 6% DECREASE IN OUR OVERALL COST TO ACHIEVE A TENANCY. WITH THAT BRIEF OVERVIEW, LET ME TURN IT OVER TO BRAD HARRIS, OUR CHIEF ACCOUNTING OFFICER, WHO WILL REVIEW OUR FINANCIAL RESULTS.

THANK YOU, GERRY. LET'S FIRST TALK ABOUT FFO 6 -- FFO. FFO FOR THE FIRST QUARTER OF 2002 INCREASED TWO 32.4 MILLION, OR 68 CENTS PER SHARE, AS COMPARED TO 30 MILLION, OR 63 CENTS PER SHARE FOR THE FIRST QUARTER OF 2001. THIS REPRESENTS AN INCREASE OF 8%. THE 68 CENTS PER SHARE FOR THIS QUARTER EXCEEDED FIRST CALL CONSENSUS ESTIMATES OF 65 CENTS PER SHARE BY 3 CENTS PER SHARE. THE BETTER-THAN-EXPECTED RESULTS ARE ATTRIBUTABLE PRIMARILY TO OTHER INCOME WHICH INCLUDES UNANTICIPATED TERMINATION FEES OF APPROXIMATELY $1 MILLION, AND TO LOWER-THAN-EXPECTED INTEREST EXPENSE DUE TO CONTINUING LOW INTEREST RATES. THE RESULTS ATTRIBUTABLE TO OUR PROPERTIES OPERATIONS WERE RIGHT IN LINE WITH OUR EXPECTATIONS. NEXT, I'D LIKE TO ADDRESS EARNINGS PER SHARE. EARNINGS WERE 55 CENTS PER SHARE FOR THIS QUARTER, AS COMPARED TO 16 CENTS PER SHARE FOR THE FIRST QUARTER OF 2001. IF WE EXCLUDE THE GAINS ON SALES OF INTEREST AND REAL ESTATE, EARNINGS WERE 33 CENTS PER SHARE FOR THIS QUARTER AS COMPARED TO THE 16% PER SHARE FOR THE FIRST QUARTER OF 2001. OTHER FACTORS CONTRIBUTING TO THE INKOREANS IN EARNINGS PER SHARE WERE IMPROVED RESULTS FROM OPERATIONS AND A DECREASE IN DEPRECIATION EXPENSE. PRIOR TO 2001, ALL BUILDINGS WERE BEING DEPRECIATED OVER 25 YEARS. IN 2000 UP WITH, THE COMPANY STARTED DEPRECIATING ALL NEWLY ACQUIRED BUILDINGS OVER 40 YEARS. AND IN THE FIRST QUARTER OF 2002, THE COMPANY CHALLENGED THE REMAINING USEFUL LIVES ASSIGNED TO THE REST OF ITS PROPERTIES AND, WHERE APPROPRIATE, CHANGED THE ESTIMATED USEFUL LIVES FROM 25 TO 40 YEARS EFFECTIVE JANUARY 1st. THIS CHANGE RESULTED IN A DECREASE IN OUR DEPRECIATION EXPENSE OF 4.8 MILLION, OR 13 CENTS PER SHARE. MOVING ON TO CAD, CAD'S AVAILABLE FOR DISTRIBUTION FOR THE QUARTER TOTALED 27.6 MILLION, OR 58 CENTS PER SHARE AS COMPARED TO 26.8 MILLION, OR 56 CENTS PER SHARE FOR THE FIRST QUARTER OF 2001. THIS INCREASE IS PRIMARILY ATTRIBUTABLE TO INCREASE IN FUNDS FROM OPERATIONS. OUR FFO AND CAD PAYOUT RATIOS FOR THE QUARTER WERE 64.4, AND 75.6%, WHICH COMPARE FAVORABLY TO THE COMPANY TARGETS OF 65 AND 80%. FFO AND CAD PAYOUT RATIOS FOR THE FIRST QUARTER OF 2001 WERE 64.9 AND 74 OF 2.6%. AND 72.6%. NOW I'D LIKE TO ADDRESS OUR SAME STORE GROWTH AND LEASING STATISTICS. SAME STORE NOI DECREASED BY 1.1% ON A CASH BASIS AND 1.9% ON A GAAP BASIS FOR THE QUARTER. THE DECREASE IN SAME STORE NOI IS ATTRIBUTABLE TO A DECREASE IN OCCUPY PANSY. SAME STORE OCCUPANCY WAS 91.1% IN THE CURRENT QUARTER AS COMPARED TO 95.1% IN THE FIRST QUARTER OF 2001. OUR SAME STORE GROWTH FOR THE QUARTER WAS CONSISTENT WITH OUR EXPECTATIONS AND THE GUIDANCE THAT WE HAVE BEEN PROVIDING. WE ALSO CALCULATED SAME STORE NOI ON AN OCCUPANCY-CONSISTENT BASE I. IF OCCUPANCY WAS THE SAME IN BOTH PERIODS, OUR SAME STORE NOI WOULD HAVE INCREASED BY 3% ON A CASH BASIS AND 2.2% ON A GAAP BASIS. WHAT THIS TELLS US IS OTHER THAN OCCUPANCY, REVENUE GROWTH AND EXPENSE CONTROL REMAIN SOLID. CURRENT OCCUPANCY FOR THE ENTIRE PORTFOLIO IS 91.2%, AS COMPARED TO 95.2% IN THE FIRST QUARTER OF 2001. OUR RETENTION RATE IS 81% FOR THE QUARTER WHICH IS WELL AHEAD OF OUR 75% TARGET AND IS AHEAD OF LAST YEAR'S RATE OF 77.5% DURING THE QUARTER WE HAD NET EFFECTIVE RENT ON A CASH BASIS AND 6.2% ON A GAAP BASIS. FOR NEW LEASES, NET EFFECTIVE RENT INCREASED BY 6.2% ON A CASH BASIS AND 9.6% ON A GAAP BASIS. WHILE THESE INCREASES ARE LOWER THAN WE SAW DURING 2001, OUR NET EFFECTIVE RATE INCREASES HAVE HELD UP WELL. OUR RETENTION RATE IS UP SIGNIFICANTLY, AND WE HAVE BEEN ABLE TO COMPLETE TRANSACTIONS WITH LESS TENANT IMPROVEMENTS AND LOWER COMMISSIONS. CAPITAL REQUIREMENTS ON NEW LEASES AVERAGE ABOUT $5.66 PER SQUARE FOOT, WHILE CAPITAL AND RENEWALS AVERAGE $2.25 PER SQUARE FOOT. AND THE AVERAGE TERM OF THESE IS ABOUT 3.7 YEARS. APPROXIMATELY 92% OF THE LEASE SIGNED DURING THE QUARTER WITH TERMS GREATER THAN 1 YEAR CONTAIN CONTRACTUAL RENTAL RATE INCREASES. WE CONTINUE TO FOCUS OUR LEASING EFFORTS ON DOING MORE DIRECT DEALS OF THE LEASES SIGNED DURING THE QUARTER, 63% WERE DIRECT DEALS BASED ON THE NUMBER OF DEALS, AND 37% WERE DIRECT DEALS BASED ON SQUARE FOOTAGE. WHILE WE ARE WELL AHEAD OF OUR TARGET ON THE NUMBER OF DEAL BASIS, WE ARE JUST SHY OF OUR TARGET OF 40% BASED ON SQUARE FOOTAGE. OUR RETURN ON INVESTMENT CAPITAL ADJUSTED FOR NON-INCOME-PRODUCING ASSETS WAS 10.4% FOR THE FIRST QUARTER OF 2002, AND FOR 2001. RETURN ON INVESTED CAPITAL IS CALCULATED BY DIVIDING NET OPERATING INCOME FOR THE TRAILING FOUR QUARTERS, THAT IS REVENUE MINUS PROPERTY OPERATING AND GENERAL ADMINISTRATIVE EXPENSES, BY THE 5-QUARTER AVERAGE AND OPERATING PROPERTIES AT COST. NOW I'D LIKE TO ADDRESS SOME SPECIFICS ABOUT OUR FINANCIAL STATEMENTS. FIRST LET'S LOOK AT OTHER INCOME. OTHER INCOME WAS 3.1 MILLION FOR THE QUARTER, AS COMPARED TO 2.3 MILLION IN THE FIRST QUARTER OF 2001. AS WE DISCUSSED IN PRIOR QUARTERS, TYPICALLY ABOUT 1/3rd OF OUR OTHER INCOME WHILE RECURRING IN NATURE IS UNCERTAIN, SUCH AS LEASING COMMISSIONS, TERMINATION OF FEES -- TERMINATION FEES AND OTHER SETTLEMENTS. THIS TYPE OF INCOME CAN FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER. WE HAD MORE INCOME FROM THESE SOURCES THIS QUARTER THAN WE DID IN THE SAME QUARTER OF THE PRIOR YEAR. THESE TERMINATION FEES WERE APPROXIMATELY $1 MILLION IN THE QUARTER AS COMPARED TO .3 MILLION IN THE FIRST QUARTER OF 2001. NEXT I'D LIKE TO COVER INDEBTEDNESS. OUR DEBT BALANCE DECREASED BY 15 MILLION COMPARED TO DECEMBER 31, 2001, OUR DEBT-TO-MARKET CAPITALIZATION IS 46.8% AND THE LEVERAGE RATIO UNDER OUR CREDIT FACILITY IS 47% WHICH IS RIGHT IN LINE WITH OUR TARGET OF 45 TO 50%. OUR FLOATING RATE DEBT BALANCE AT THE END OF THE QUARTER WAS $202.8 MILLION OR ABOUT 10.35% OF TOTAL ASSETS. AS REPORTED AT YEAR EN, WE CONTINUE TO FOCUS ON OUR BALANCE SHEET. OUR LINE OF CREDIT WAS RENEWED IN THE SECOND QUARTER OF 2001, EXPANDING CAPACITY TO 500 MILLION. AS NONE OF OUR DEBT MATURES IN 2002, WE HAVE NO REAL SHORT-TERM DEBT EXPOSURE. I'D LIKE TO SPEND JUST A MINUTE ON ACCOUNTS RECEIVABLE. MARKET CONDITIONS CONTINUE TO INCREASE EVERYONE'S EXPOSURE TO CREDIT RISK. AS WE REPORTED AT YEAR END, WE HAVE SEEN A SLOWDOWN IN THE COLLECTION OF SOME TENANTS' ACCOUNTS. THE PROGRAMS WE PUT INTO PLACE LAST YEAR THAT COORDINATED THE EFFORTS OF PROPERTY MANAGEMENT, LEGAL AND ACCOUNTING PERSONNEL, CONTINUE TO ACHIEVE SIGNIFICANT RESULTS. ACCOUNTS RECEIVABLE BEFORE RESERVES FOR DOUBTFUL ACCOUNTS ARE DOWN 24% FROM YEAR END. AND AT YEAR END, BALANCES BEFORE RESERVES WERE DOWN 28% FROM THE THIRD QUARTER. AS PART OF OUR NEW PROGRAM, WE TRACK TRENDS ON SPECIFIC ACCOUNTS MUCH MORE CLOSELY AND PROVIDE RESERVES ON SPECIFIC ACCOUNTS, AS WELL. IN ADDITION TO OUR NORMAL MONTHLY PROVISION. WE PROVIDE 4 22,000 IN ADDITIONAL RESERVES DURING THE QUARTER, OUR ALLOWANCE FOR DOUBTFUL ACCOUNTS IS 5 MILLION AS OF MARCH 31st. RESERVE BALANCES EQUAL 14.4% OF TOTAL ACCOUNTS RECEIVABLE INCLUDING STRAIGHT-LINE RENT AND 1% OF ANNUAL -- 1.7% OF ANNUAL REVENUES. WE BELIEVE OUR CURRENT LEVEL OF RESERVES ADEQUATELY ADDRESSES EXISTING CREDIT RISKS AND WE WILL EVALUATE OUR RESERVE LEVELS ON A CONTINUING BASIS. WE EXPECT INCREASED CREDIT RISKS TO CONTINUE TO BE AN ISSUE THROUGH 2002. AND IN RESPONSE, AS WE HAVE PREVIOUSLY DISCUSSED, WE SIGNIFICANTLY INCREASED THE 2002 BUDGET FOR BAD DEBTS. ALTHOUGH OUR HISTORICAL LOSS RATE IS VERY LOW AVERAGING ABOUT .35% OVER THE PAST 2 YEARS, WE BELIEVE THIS STRATEGY TO INCREASE OUR RESERVES IS PRUDENT GIVEN CURRENT MARKET CONDITIONS. WE WILL CONTINUE OUR NEW PROGRAM TO EARLY TROUBLED ACCOUNTS AND MAINTAIN OUR INCREASED COLLECTION EFFORTS. I WOULD LIKE TO ADDRESS SFAS 144 FOR JUST A MINUTE. THERE'S BEEN A LOT OF DISCUSSION OVER THE PAST COUPLE OF MONTHS RELATED TO THE RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARD BOARD STATEMENT 144 WHICH ADDRESSES THE ACCOUNTING AND RECORDING OF LONG-LIVED ASSETS. FAS 144 REQUIRES THAT THE RESULT OF OPERATIONS RELATED TO PROPERTIES THAT HAVE BEEN SOLD OR PROPERTIES THAT ARE INTENDED TO BE SOLD BE PRESENTED AS DISCONTINUING OPERATIONS IN THE INCOME STATEMENT AND THE PROPERTIES INTENDED TO BE SOLD BE DESIGNATED AS HELD FOR SALE ON THE BALANCE SHEET. FOR REAL ESTATE COMPANIES, THIS STATEMENT CREATES AN ACCOUNTING NIGHTMARE. THE ANALYSTS COMMUNITY IS EFFECTIVELY ADDRESSED THE IMPACT OF THE STATEMENT AND ANNOUNCED THAT THEY WILL CONSIDERATE RESULTS OF CONTINUING AND DISCONTINUED OPERATIONS IN THEIR EVALUATIONS OF FFO. IN OTHER WORDS, BUSINESS AS USUAL AS IT RELATES TO FFO. FINANCIAL REPORTING IS AN ENTIRELY DIFFERENT STORY. WHILE THIS STATEMENT WILL HAVE MINIMAL IMPACT, IF ANY, ON OUR TOTAL RESULTS OF OPERATIONS, IT DOES ADD A TREMENDOUS AMOUNT OF COMPLEXITY TO THE FINANCIAL STATEMENTS. IN ORDER TO EVALUATE THE COMPANY'S PERFORMANCE, YOU WILL NEED TO LOOK AT BOTH THE COMBINED RESULTS OF CONTINUING AND DISCONTINUED OPERATIONS. IN CONCLUSION, LET'S TALK ABOUT 2002. WE ARE ENCOURAGED ABOUT WHAT WE SEE SO FAR FOR 2002, ALTHOUGH OCCUPANCY HAS DECLINED, RENTAL RATES ARE STILL POSTING INCREASES, EXPENSES AND CAPITAL SPENDING REMAIN WELL CONTROLLED, AND WHILE IT IS TAKING LONGER, DEALS ARE GETTING DONE. WE ARE REAFFIRMING OUR FFO RANGE OF $2.72 TO $2.82 FOR THE YEAR, AND ESTIMATE FFO FOR THE SECOND QUARTER TO BE IN THE RANGE OF 65 TO 67 CENTS, MOST LIKELY AT THE LOWER END OF THIS RANGE. WITH THAT, I'LL TURN IT BACK OVER TO GERRY.

GREAT.

THANKS, BRAD. AS BRAD OUTLINED WE ARE VERY PLEASED WITH OUR FINANCIAL RESULTS AND OPERATING PERFORMANCE. OUTLINED ] WHILE PAST PERFORMANCE AND OUR STRONG MARKET POSITION GIVE US GREAT COMFORT, THE REAL ISSUE IS MITIGATING RISK AND WHAT'S CLEARLY GOING TO BE A SLOWER OPERATING ENVIRONMENT FOR BOTH OUR EXISTING PORTFOLIO AND FOR OUR PROPERTIES UNDER DEVELOPMENT FOR AT LEAST THE NEXT FOUR QUARTERS. OUR BUSINESS PLAN ANTICIPATES THE CONTINUATION OF THE RECESSION IN OUR ECONOMY ALTHOUGH THE GDP TODAY WAS SO STRONG, WHO KNOWS WHAT THEY WILL CALL IT BUT CERTAINLY WE ARE NOT SEEING THOSE RESULTS RIGHT NOW IN THE REAL ESTATE MARKET. WE ALSO ANTICIPATE THERE WILL BE INCREASING PRICE COMPETITION FOR DEALS, CERTAINLY LOWER LEVELS OF DEVELOPMENT IF ANY COMING ONLINE, AS WELL AS INCREASED COMPETITION FOR NEW LEASE TRANSACTIONS. OUR PORTFOLIO OCCUPANCY IS RIGHT WHERE WE THOUGHT IT WOULD BE RIGHT WHERE WE INDICATED IN OUR PREVIOUS CALL. MORE IMPORTANTLY, OUR OCCUPANCY RATES IN SEVERAL KEY SUBMARKETS COMPARES EXTREMELY FAVORABLY TO OVERALL MARKET OCCUPANCY. A BIT OF A DISAPPOINTMENT IS THAT OUR OCCUPANCY ENRICHMENT IS LAGGING THAT MARKET PRIMARILY DUE TO THE CONTINUED SLOW LEASEUP AT MAIN STREET CENTER AS WELL AS ANTICIPATED MOVEOUTS BY SEVERAL TENANTS IN THE FIRST QUARTER WHICH HAVE RESULTED IN OUR OCCUPANCY IN THAT MARKET BEING AT 86%. AS JEFF WILL TOUCH ON IN A MOMENT, AND IT'S CLEARLY A POINT THAT CAN'T BE OVERLOOKED, WE LOST ABOUT 2 .5 percentage POINTS OF OCCUPANCY DUE TO CREDIT ISSUES. NOT FROM MOM AND POP COMPANIES BUT FROM PREVIOUSLY WELL CAPITALIZED COMPANIES. I HAVE TALKED FOR A NUMBER OF YEARS ABOUT THE SECONDARY CREDIT ASPECT OF OUR BUSINESS, AND AS AN INDUSTRY, WE REALLY ARE VERY SUSCEPTIBLE TO THESE TYPES OF SITUATIONS. THAT'S WHY WE HAVE SUCH GREAT ACCOUNTS RECEIVABLE RESERVES IN PLACE. OUR TENANT SERVICE PLATFORM CONTINUES TO EXPAND ITS SUCCESSES. eTENANTS IS CURRENTLY BEING USED BY 99% OF OUR TENANTS, AND AS REMARKABLE AS IT SOUNDS, ALMOST 50% OF OUR WORK ORDERS ARE NOW COMING IN THROUGH OUR eTENANTS FACILITY MANAGEMENT TOOL. THAT HAS RESULTED IN MUCH HIGHER LEVEL OF TENANT RESPONSE, INCREASED OPERATING EFFICIENCIES IN OUR FIELD OPERATIONS, AS WELL AS THE ABILITY TO BUILD A VERY COMPELLING DATABASE FOR PREVENTIVE MAINTENANCE SITUATIONS. WE HAVE SOME ADDITIONAL ENHANCEMENTS UNDER WAY THAT WILL FURTHER IMPROVE THIS PLATFORM, BUT IT REALLY IS PERFORMING EXCEEDINGLY WELL. THAT AND OUR EXCELLENT PROPERTY MANAGEMENT TEAM ARE A KEY REASON FOR THE HIGH LEVEL OF TENANT SATISFACTION AND RETENTION. AT THIS POINT, JEFF WILL WALK US THROUGH SOME ADDITIONAL BACKGROUND ON MARKET CONDITIONS. AND HOW WE ARE DOING OUT IN THE FIELD.

THANKS, GERRY. CERTAINLY, THE RECOVERY OF THE GENERAL ECONOMY CONTINUES TO LAG BEHIND EVERYONE'S HOPES OR WISHES, BUT AS GERRY INDICATED, BUSINESS DOES CONTINUE TO BE CONDUCTED. THAT SAID, THE GOOD NEWS IS, BRANDYWINE CONSISTENT WITH OUR LONG TRACK RECORD MAXIMIZES THE SITUATION AND CONTINUED TO ACHIEVE MORE THAN ITS MARKET SHARE AND IN SO DOING, ONCE AGAIN, OUTPERFORMED THE MARKET BENCHMARKS IN ITS LOCAL PEER GROUPS. AS IT RELATES TO BOTH THE DIRECT AND OVERALL VACANCY RATE, BRANDYWINE'S PORTFOLIO ONCE AGAIN OUTPERFORMED EVERY ONE OF THE 10 INDIVIDUAL SUBMARKETS IT PARTICIPATES IN. WITH THE EXCEPTION OF ONE MARKET, THIS OUTPERFORMANCE RANGES ANYWHERE FROM 400 TO 1100 BASIS POINTS, AND AVERAGES JUST OVER 600 BASIS POINTS OVERALL. TAKING INTO CONSIDERATION THE IMPACT OF SUBLET SPACE, WE STILL CONTINUE TO OUTPERFORM THE MARKET BY AN AVERAGE OF OVER 500 BASIS POINTS. ADMITTEDLY, WHAT IS MOST FRUSTRATING ABOUT THIS OCCUPANCY THAT TIS STICK IS THAT THE RESULTS WOULD HAVE CLEARLY BLOWN AWAY THE MARKET HAD IT NOT BEEN FOR THE UNANTICIPATED BANKRUPTCIES AS GERRY MENTIONED, RELIANCE INSURANCE, 63,000 FEET; COMDISCO, 50,000 FEET, NAHANT, 25,000 FEET, AND VLASIC, 100,000 SQUARE FEET [ NAVIANT ] THE COMBINATION OF WHICH EQUATED TO APPROXIMATELY 250 BASIS POINTS OF OCCUPANCY IN OUR SUBURBAN PHILADELPHIA AND SOUTH JERSEY submarkets ALONE. THERE ARE ANOTHER 68 OR 70,000 SQUARE FEET OF TENANTS ON OUR CREDIT WATCH LIST, BUT WE ARE MONITORING THEM CLOSELY AND THERE IS LIMITED EXPOSURE BEYOND THIS BASED ON WHAT WE CAN TELL AT THIS POINT. THAT SAID, THE OVERALL MARKETS' DIRECT VACANCY RATE HAS CREASED SLIGHTLY COMING IN JUST ABOVE 1 FULL PERCENTAGE POINT FOR THE PREVIOUS QUARTER FROM APPROXIMATELY 12.4% TO 13.6 [ INCREASED ] THE OVERALL VACANCY RATE WHICH INCLUDES SUBLET SPACE ALSO SHOWED A SMALL INCREASE GROWING FROM APPROXIMATELY 16.5% TO 17.1. AS A RESULT, ABSORPTION FOR THE QUARTER ENDING MARCH 31, '02 WAS A NEGATIVE 171,000. DURING THE PAST 5 YEARS, ABSORPTION HAS TYPICALLY -- THE LEVELS HAVE TYPICALLY BEEN IN THE RANGE OF 250,000 SQUARE FEET PER QUARTER. DURING THIS, THOUGH, AND I'LL TOUCH ON THIS LATER, BRANDYWINE EXECUTED ABOUT 1.3 MILLION SQUARE FEET OF LEASES. QUITE FRANKLY, MUCH OF THE INCREASE IN THE OVERALL VACANCY RATE IS ATTRIBUTABLE TO A SMALL NUMBER OF BIG BLOCKS OF SUBLET SPACE RECENTLY PLACED ON THE MARKETS, VANGUARD, 400,000 FEET, EARTH IS MET, 100,000, LOCKHEED, 100,000, PNC BANK, 170,000 FEET AND FC IT. FOR 50,000 FEET. AND BECAUSE OF THE SCALE OF THESE SPACES AND THE LENGTH OF TIME -- TERM REMAINING, A FEW DEALS FLOATING AROUND IN THE MARKET HAVE IN FACT LANDED IN THESE LOCATIONS. ABOUT 220,000 SQUARE FEET HAS BEEN ABSORBED TO DATE THUS FAR. SEAMEN'S FOR 40,000 FEET, RUBBERMAID A NEW DEAL IN THE MARKET FOR 80,000 FEET AND SUNGUARD, ANOTHER 100,000 FEET. WE THINK IT'S REASONABLE TO EXPECT THAT SOME FUTURE DEALS WOULD BE ABSORBED BY THESE SPACES, BUT HISTORICALLY, WITH THE EXCEPTION OF 1999, WE HAVE SEEN ACTIVITY HAS AVERAGED APPROXIMATELY 3 1/2 MILLION SQUARE FEET PER YEAR. AND AS SUCH, WE WOULD ANTICIPATE THE IMPACT WOULD NOT BE TOO DRAMATIC. IN FACT, YEAR TO DATE LEASING ACTIVITY AS OF MARCH 31, '02 IS REPORTED TO BE APPROXIMATELY 1.1 MILLION SQUARE FEET. AND ASSUMING THE COUPLE -- THE PREVIOUS COUPLE OF QUARTERS WERE LOW SPOTS, AND THE GENERAL ECONOMY CONTINUES TO IMPROVE FOR THE BALANCE OF THE YEAR, WE SHOULD SEE CONTINUING STRENGTH. RENTAL RATES, IRONICALLY, HAVE REMAINED RELATIVELY FLAT FOR THE MOST PART OR HAVE TRENDED DOWNWARD ONLY SLIGHTLY IN CERTAIN submarkets. THIS DOWNWARD TREND HUH IMPACTED CERTAIN submarkets ENOUGH TO CAUSE SOME LANDLORDS TO OFFER RENT CONCESSIONS, INCLUDING BUT NOT LIMITED TO FREE RENT. THE FREE RENT COMPONENT APPEARS TO BE LIMITED, SHOWING UP IN ONLY 5 OF THE 10 SUBMARKETS AND IS MORE OFTEN OFFSET BY REDUCED CAPITAL COSTS OR AN ACCELERATED OCCUPANCY DATE. BUT IT'S STILL OUT THERE. IT'S NOT -- AND IT'S NOT ANTICIPATED TO GO AWAY IN THE SHORT TERM. LASTLY, DESPITE THIS DOWNWARD TREND, I'D LIKE TO POINT OUT THAT RENT LEVELS ARE CURRENT FOR THE MOST PARDON ARE STILL WELL ABOVE WHAT WAS ORIGINALLY UNDERWRITTEN DURING THE ACQUISITION STAGE. THOUGH THERE ARE CERTAINLY MIXED SIGNALS BEING PRESENTED DURING THESE UNCERTAIN TIMES, AND ONE PIECE OF INFORMATION WE CONTINUE TO VIEW AS VERY POSITIVE IS THE REASONABLY HIGH LEVEL OF TRAFFIC WE ARE EXPERIENCING ON OUR VACANT SPACES MEANING THE NUMBER OF PROSPECTS WE ARE TOURING THROUGH OUR VACANT SPACES YEAR TO DATE MARCH 31, '02, WE TOURED 311 DIFFERENT COMPANIES THROUGH OUR VACANT SPACES. THIS EQUATES TO APPROXIMATELY 4 PURVEY CAN'T SPACE, AND AS A POINT OF REFERENCE, THE HISTORICAL NORM FOR US IS TYPICALLY AROUND 3 PER SPACE. THIS REASONABLY HIGH LEVEL ACTIVITY HAS CONTINUED FOR 2 CONSECUTIVE QUARTERS AND TO THE EXTENT THESE ACTIVITIES LEVELS DON'T DROP OFF AND A REASONABLE NUMBER OF THESE PROSPECTS ARE CONVERTED TO LEASES, WE ARE HOPEFUL THAT THE BOTTOM OF THE MARKET HAS BEEN RECOGNIZED AND IS BOUNCING BACK. NOW, ACTIVITY IS GREAT, BUT HOW DOES THIS TRANSLATE INTO DEALS BEING SIGNED? WE ARE PLEASED TO SAY THAT FOR THE COMBINED PA, CENTRAL AND SOUTHERN NEW JERSEY MARKETS, 112 LEASES TOTALING 630,000 SQUARE FEET WERE EXECUTED ON VACANT SPACES. AN ADDITIONAL 89 TRANSACTIONS TOTALING APPROXIMATELY 700,000 SQUARE FEET WERE SIGNED FOR RENEWAL DEALS FOR A COMBINED 201 DEALS AND 1.3 MILLION SQUARE FEET. NOW, IN CLOSING, DESPITE THE UNCERTAINTIES IN THE PRESS REPORTS, WE REMAIN VERY PLEASED WITH THE RELATIVE STABILITY OF OUR CORE MARKETS AND SEEING NO CLEAR INDICATION THAT THE OVERALL MARKET DYNAMICS WILL CHANGE DRAMATICALLY. OR THAT WE WILL EXPERIENCE A PRECIPITOUS DROP IN ANY OF THE BENCHMARKS. WE ARE AGGRESSIVELY PURSUING OUR BUSINESS PLAN AND CREATING AS MUCH VALUE FROM THE PORTFOLIO AS POSSIBLE. AND THERE IS NO DOUBT THAT AN AGGRESSIVE PURSUIT OF ALL LEASING ACTIVITY ALONG WITH THE CLEAR FOCUS ON TENANT RETENTION AND STRONG CREDIT IS PARAMOUNT. AND THERE IS ALSO NO DOUBT IN MY MIND THAT WE HAVE THE BEST MARKETING TEAMS IN THE REGION. WE CONTINUE TO RECEIVE EXTREMELY POSITIVE FEEDBACK ON OUR 10 SERVICES PROGRAM AND WE HAVE A GREAT INVENTORY. THAT SAID, WE HAVE EVERY INTENTION OF ACHIEVING OUR OBJECTIVES. BACK TO YOU, GERRY.

THANKS, JEFF. ANOTHER BRIGHT SPOT IN THE FIRST QUARTER WAS THE CONTINUATION OF OUR SUCCESS IN MEETING OUR INVESTMENT SALE TARGETS. WE'RE WELL ON TRACK TO EXCEED OUR BENCH MARKET TARGETS AT PRICING LEVELS THAT WE HAD PROJECTED. SEEING A BIT OF A RESURGENCE IN THE INVESTMENT MARKET, GEORGE IS GOING TO TALK ABOUT, AND WE REALLY WANT TO WORK ON THAT AS A MAJOR PRIORITY. SO, GEORGE, MAYBE YOU CAN TAKE US THROUGH SOME OF THE INVESTMENT ACTIVITY.

THANK YOU, GERRY. AS GERRY HAD MENTIONED DURING OUR LAST QUARTERLY CONFERENCE CALL, WE HAVE MADE AND CONTINUE TO MAKE TREMENDOUS STRIDES COMPLETING OUR EXIT FROM THE NORTHERN NEW JERSEY AND LONG ISLAND MARKETS. 105 MILLION OF THE GROSS PROFITS APPROXIMATELY 157 MILLION OF PROPERTY SALES COMPLETED FROM JANUARY 1, 2002, ARE DERIVED FROM OUR NORTHERN NEW JERSEY AND LONG ISLAND PROPERTY SALES. THE BALANCE OF THE PROPERTY SALE PROCEEDS ARE A RESULT OF OUR SALE OF SEVERAL NONCORE ASSETS, LARGEST OF WHICH BEING THE APPROXIMATELY $41 MILLION SALE OF BUCKS COUNTY PORTFOLIO. THE LONG ISLAND TRANSACTION NOT YET ANNOUNCED REPRESENTS THE FIRST OF 2 PORTFOLIOS SALES THAT WILL COMPLETE OUR EXIT OF NEARLY ALL OF OUR LONG ISLAND ASSETS. THE TRANSACTION CLOSED LAST WEEK AND CONSISTS OF 7 OFFICE BUILDINGS TOTALING 378,000 SQUARE FEET WITH THE PERFORM PRICE OF $31,681,000, OR $84 PER SQUARE FOOT. AND ALSO IT REPRESENTS A 10.2% CAP RATE ON PROPOSED THE PROTECTED 2002 UNDERLINE AND 8.1% CAP RATE ON IN PLACE UNDERLINE. THE BAFFLES OF THE LONG ISLAND PORTFOLIO IS UNDER FIRM AGREEMENT. WE ARE UNDER AGREEMENT AND WELL INTO THE DUE DILIGENCE PROCESS. WE WE CONTINUE TO ANTICIPATE WE'LL COMPLETE OUR EXIT IN THE LONG ISLAND MARKET BY END OF THE SECOND QUARTER OF 2002 WITH APPROXIMATELY 4.2 MILLION GAIN ON SALE. IN ADDITION TO THE LONG ISLAND PROPERTIES, WE APPROXIMATELY 365,000 SQUARE FEET OF PROPERTIES CURRENTLY UNDER CONTRACT, OR ADVANCED STAGES OF LETTERS OF INTENT. IF WE PROGRESS TO CLOSING WITH THESE PROCEEDS WILL GENERATE GROSS PROCEEDS OF 25 MILLION AND REPRESENTED 10% UNDERLINE. OF THE 12 CLOSED OR ANTICIPATED TO CLOSE DEALS, SEVERAL ARE USER SALES, FOUR REPRESENTED LONG ISLAND OR NORTHERN NEW JERSEY EXIT PROPERTIES, AND ONE -- ONLY THE ONE WAS AN IN MARKET INVESTOR SALE WHICH ALSO HAD HIGH TENANT ROLLOVER AND HIGH COST OF CAPITAL IN THE SHORT TERM. WE ARE ALSO PLEASED THAT WE HAVE EXECUTED OR EXCEEDEDED OUR FULL YEAR 2002 GOAL OF 150 MILLION IN ASSET SALES. WE'LL CONTINUE TO ANALYZE OUR EXISTING PORTFOLIO TO DETERMINE WHICH, IF ANY, PROPERTIES WOULD BE APPROPRIATE SALE CANDIDATES BASED ON EACH PROPERTY'S POSITIONING WITHIN OUR PORTFOLIO, ITS ECONOMIC LIFE AND OUR REINVESTMENT ALTERNATIVES. WE CONTINUE TO FOCUS ON OUR GOALS OF, ONE, REINVESTING IN QUALITY ASSETS IN EACH OF OUR CORE MARKETS, TWO CREATING CAPACITY BY SLIGHTLY DELEVERAGING THE COMPANY AND THREE REDUCING OUR CORPORATE GENERAL AND ADMINISTRATIVE COSTS BY ELIMINATING HIGH AREAS OF OVERHEAD IN OUR OPERATIONS. WE ARE FIRM BELIEVERS BEING A DOMINANT LANDLORD IN EACH OF OUR MARKETS THAT WE'LL GENERATE SUPERIOR OPERATING RESULTS OVER TIME. NATIONALLY OFFICE INVESTMENT SALES IN THE FIRST QUARTER OF 2002 WERE DOWN 47% FROM LAST YEAR. WE ATTRIBUTE THIS DECLINE TO LACK OF QUALITY FAIRLY PRICED ASSETS AVAILABLE -- SALE AT THE CURRENT TIME RATHER THAN UNAVAILABILITY OF ACQUISITION CAPITAL. AS WE HAVE BEEN EXPERIENCING, IT'S AN EXCELLENT TIME TO BE A SELLER. THERE ARE RELATIVELY FEW QUALITY ASSETS FOR SALE AND COMPETITION ACQUIRING THESE PROPERTIES IS INTENSE. EQUITY IS READILY AVAILABLE AS IS DEBT WITH LOW INTEREST RATES FOR SHORT, INTERMEDIATE AND LONG TERM PERIODS. WHILE WE HAVEN'T SEEN A TREMENDOUS COMPRESSION OF CAP RATES FROM BIDDING COMPETITION WE HAVE SEEN SOME BUYERS TO BRIDGE THE GAP BY PAYING SLIGHTLY MORE FOR A PROPERTY, ACHIEVING THEIR DESIRED RETURN BY USING SLIGHTLY HIGHER LEVERAGE RATES. UNCERTAINTY ON THE UNDERLYING REAL ESTATE MARKETS COMBINED WITH VERY RIGOROUS UNDERWRITING SOMEWHAT OFFSET THE EXCESSIVE DEMAND FOR PROPERTIES. COMPETITION FOR PROPERTIES IN OUR CORE MARKETS AT SLIGHTLY COMPRESSED CAP RATES, WE DON'T EXPECT TO SEE COMPRESSION TO THE 75 TO 8.5% RANGE AS RECENTLY SEEN FOR A SELECT TROPHY PROPERTIES IN A FEW MAJOR METROPOLITAN MARKETS. CONVERSELY, AS A BUYER, IT IS INCREASINGLY DIFFICULT TO SECURE PROPERTIES THAT MEET OUR INVESTMENT CRITERIA. HOWEVER, OUR EXCELLENT REPUTATION AND RELATIONSHIP WITH SELLERS IN OUR MARKETS PROVIDE US WITH AN OPPORTUNITY TO SEAL NEARLY EVERY DEAL. REGARDLESS OF OUR POSITION IN THE REAL ESTATE CYCLE ECONOMIC TERMS, QUALITY OF EACH BUILDING, LOCATION AND TENANT CREDIT SIMPLY CANNOT BE OVERLOOKED. WE HAVE NOT AND WILL NOT COMPROMISE OUR INVESTMENT CRITERIA TO ACQUIRE ASSETS THAT DID NOT MAKE ECONOMIC SENSE. WE ALSO, HOWEVER, CONSIDER ALL OPPORTUNITIES WHERE WE CAN CREATE VALUE THROUGH OUT EXISTING OPERATING PLATFORM THROUGH A DIRECT INVESTMENT, CO-INVESTMENT OR JOINT VENTURE. BACK TO YOU TO GERRY.

THANK YOU, GEORGE. IN ADDITION TO PURSUING PROFIT OPPORTUNITIES, AS WE HAVE TALKED ON PREVIOUS CALLS, WE'RE VERY MUCH FOCUSED ON RISK MANAGEMENT. AS SUCH, I'D LIKE TO SPEND A FEW MINUTES DISCUSS OUR BUSINESS PLAN AND HOW WE PLAN ON MITIGATING RISK FOR THE BALANCE OF '02. AS IN PREVIOUS CALLS, THERE ARE THREE SPECIFIC ELEMENTS I'D LIKE TO SPEND A MOMENT ON. FIRST IS TENANT CREDIT AND ROLLOVER RISK. BRAD AMPLIFIED OUR CREDIT CONTROL SO MY COMMENTS WILL FOCUS PRIMARILY ON ROLLOVER. FOR 2002, ON OUR ROLLOVERS, WE HAVE APPROXIMATELY 65% LOCKED AWAY AT AN AVERAGE RENTAL RATE INCREASE OF 8.6%. THAT IS UP FROM ABOUT 55% THAT WE HAD LOCKED WAY AT THE TIME OF OUR LAST CALL. WE'RE DELIGHTED WITH OUR PROGRESS ON THESE RENEWALS, AND THUS FAR THE RESULTS HAVE BEEN VERY CONSISTENT WITH OUR BUSINESS PLAN. SO FROM A RISK MANAGEMENT STANDPOINT ON THE EXISTING PORTFOLIO, WE'RE WELL ON TOP OF OUR '02 ROLLOVERS, MORE IMPORTANTLY WE'RE ACTUALLY OUT THERE AGGRESSIVELY LOOKING AHEAD AND WELL INTO DISCUSSIONS WITH THE NUMEROUS KEY TENANTS WHO HAVE ROLLOVERS OCCURRING IN 2003. THE SECOND ISSUE I'D LIKE TO ADDRESS IS THE RISK ASSOCIATED WITH OUR DEVELOPMENT PIPELINE. AS YOU CAN SEE FROM THE SUPPLEMENTAL PACKAGE, DURING THE QUARTER WE DELIVERED NEWTOWN COMMONS, 10 2,000-SQUARE-FOOT FULLY LEASED BUILDING AND SUBSEQUENT TO THE QUARTER, 15 CAMPUS BOULEVARD, ANOTHER 100% PRERELEASED BUILDING. AS A RESULT, OUR DEVELOPMENT PIPELINE PRERELEASING PERCENTAGE HAS DROPPED TO 39%. TO PUT THIS IN CONTEXT, OUR THREE REMAINING DEVELOPMENT PROJECTS WE HAVE APPROXIMATELY 250,000 SQUARE FEET THAT REMAINS UNLEASED. THE PIPELINE STANDS AT 92 MILLION, OR ABOUT 4.5% OF OUR ASSET BASE. WE CONTINUE TO SEE VERY GOOD TO EXCELLENT ACTIVITY AT 401 PLYMOUTH. ACTIVITY AT 400 BERWYN PARK REMAINS SLOW, SO WE HAVE HAD VERY LITTLE LEASE-UP SINCE OUR LAST CALL. 935 IS THE OTHER DEVELOPMENT PROJECT WE HAVE UNDER WAY. THAT WILL BE DELIVERED LATER THIS YEAR. AND WHILE WE HAVE A NUMBER OF PROSPECTS, NOTHING IS SIGNED AT THIS POINT. I'M VERY DISAPPOINTED THAT WE HAVE NOT MADE MORE PROGRESS IN OUR DEVELOPMENT PROGRAM. HOWEVER, ONLY 2.5 CENTS OF OUR 2002 FFO TARGET IS COMING OFF UNLEASED SPACE IN OUR DEVELOPMENT PROJECT. ASSUMING THAT THAT WOULD BE LEASED UP. WHILE SIGNED LEASES HAVE NOT BEEN FORTHCOMING WE HAVE GOOD ACTIVITY AND WE ARE CONFIDENT WE'LL POST GOOD RESULTS OVER THE NEXT SEVERAL QUARTERS. WE CONTINUE TO MOVE FORWARD IN THE MARKETING OF NUMEROUS SITES FOR BUILD-TO-SUIT OPPORTUNITIES AND PERFECTING THE APPROVALS ON SOME OF OUR REMAINING LANDHOLDINGS. THE LASRISK FACTOR I'D LIKE TO LOOK AT IS OUR BALANCE SHEET INVESTMENT STRATEGY. GEORGE BROUGHT YOU UP TO SPEED ON OUR DISPOSITION AND ACQUISITION PROGRAM FOR THE YEAR. SUFFICE TO SAY THAT WE ARE VERY PLEASED WITH THE PROGRESS THAT'S BEEN MADE AND IF YOU LOOK AT THE LAST SEVERAL QUARTERS WE HAVE DONE QUITE WELL. GOING BACK 4 QUARTERS, WE HAVE SUCCESSFULLY REFINED OUR PORTFOLIO AND EXITED THE NORTHERN VIRGINIA MARKET VIA THE SWAP WITH PRENTICE PROPERTIES AND IN NORTHERN NEW JERSEY AND NOW LONG ISLAND MARKET PLACES THROUGH ACCESS SALES TO BOTH PRIVATE INVESTORS, INSTITUTIONS AND USERS. ALL OF THESE SALES HAVE OCCURRED IN THE PROFITABLE FASHION. IN ADDITION TO THAT, WE HAVE REDUCED OUR EXPOSURE TO OLDER INDUSTRIAL PRODUCT AND FLEX SPACE THROUGH THE TRANSACTION WITH FIRST INDUSTRIAL. THESE TRANSACTIONS HAVE COMBINED TO FURTHER UPGRADE OUR HIGH ASSET QUALITY, ENHANCED OUR OPERATING ECONOMIES, REDUCED OUR PROPERTY LEVEL G&A COSTS, AND MOST IMPORTANTLY, IMPROVED OUR CORE MARKET COMPETITIVE POSITION, ALL AT A TIME WHEN MARKET POSITIONING IS ABSOLUTELY CRITICAL. OUR LEVERAGE LEVELS REMAIN WITHIN OUR TARGET RANGE. FRANKLY, OUR BUYERS TRY TO WORK OUR ACTUAL LEVERAGE LEVEL TOWARD THE LOWER PART OF OUR RANGE AT 45%. RIGHT NOW, WE STAND AS BRAD TOUCHED ON UNDER OUR CREDIT FACILITY CALCULATION AT 47%. ALSO AS BRAD TOUCHED ON, THERE IS NO DEBT ROLLING IN THE PORTFOLIO FOR THE BALANCE OF 200210 WE HAVE OUR DEBT PORTFOLIO IN VERY GOOD SHAPE. SEVERAL OTHER POINTS. THE MANAGEMENT ORGANIZATION IS PROGRESSING WONDERFULLY AND ALSO SUBSEQUENT INTEGRATION IS JUST ABOUT COMPLETE THAT CFO SEARCH IS NARROWED TO TWO CANDIDATES AND WE ARE IN ADVANCED DISCUSSIONS AND WILL ULTIMATELY SELECT THE BEST CANDIDATE IN THE NOT TOO DISTANT FUTURE. AS BRAD INDICATED, WE ARE ALSO REAFFIRMING OUR GUIDANCE FROM 272 TO 282 FOR '02. WE ARE ALSO PROJECTING SECOND QUARTER FFO WITHIN THE RANGE OF 65 TO 67 CENTS. AGAIN, GIVEN ALL THE YOUR OWN CERTAINTY IN THE MARKET PLACE, I WOULD URGE EVERYONE THAT BASED ON THIS UNCERTAINTY THAT YOU STILL LOOK AT THE LOWER END OF THAT RANGE. WE REALLY DON'T ANTICIPATE ANY OTHER DEVELOPMENT ACTIVITY IN THE COMPANY OTHER THAN WHAT HAS BEEN ANNOUNCED UNLESS WE CAN ACHIEVE A SIGNIFICANT LEVEL OF LEASING. ALSO, THE ACCELERATION OF OUR SALES ACTIVITY WILL CREATE MINOR DILUTION WHICH WILL IMPACT US PRIMARILY IN THE SECOND AND EARLY THIRD QUARTER. ONE OF OUR MAIN CONCERNS REMAINS SIMPLY THAT TIME LAGGING GETTING TENANTS TO SIGN LEASES AND GETTING THEM PHYSICALLY INTO THE SPACE. LOCAL ZONING REQUIREMENTS HAVE CONTINUED TO GET MORE STRINGENT, COMBINE THAT WITH THE SLOWER DECISION CYCLE, WE'RE SEEING SLIPPAGE IN GETTING TENANTS ACTUALLY INTO SPACE. WE ANTICIPATED ALSO THAT THE FIRST AND SECOND QUARTERS WOULD BE OUR SLOWEST GROWTH QUARTERS, AND WE ANTICIPATE THIS TREND CONTINUING. THE FOCUS IN THE COMPANY CONTINUES TO BE EVALUATING ALL POTENTIAL ACQUISITION OPPORTUNITIES IN THE MARKETPLACE, TYING UP KEY PARCELLS OF BRAND ON A LONG-TERM OPTIONIST AS A VEHICLE TO CREATE FUTURE VALUE. AND CONTINUING THE REFINEMENT OF OUR G&A OPERATIONS TO ENSURE THAT WE OPERATE SIMPLY THE BEST THAT WE POSSIBLY CAN. WE CONTINUE TO WORK EXTENSIVELY WITH THE BROKER COMMUNITY TO POSITION THE COMPANY BOTH WITH THEM AND THE EYES OF THE CORPORATE MARKETPLACE AS THE MOST RESPONSIVE AND MOST EFFECTIVE LANDLORD IN OUR CORE MARKET AREAS. TO CONCLUDE, WHILE WE ARE DELIGHTED WITH OUR FIRST QUARTER RESULTS, WE REMAIN CAUTIOUS ALBEIT A BIT MORE OPTIMISTIC BUT NOT ALL THAT MUCH MORE SO ABOUT THE ACTIVITY FOR THE BALANCE OF THE YEAR. OUR MANAGEMENT TEAM MEMBERS HAVE BEEN THROUGH SEVERAL DIFFERENT CYCLES IN THESE MARKETS BEFORE AND WE ARE FULLY PREPARED TO EXECUTE OUR BUSINESS PLAN AND CONTINUE TO, AS WE HAVE IN THE PAST, TAKING A PRACTICING MAC ITCH APPROACH TO RUNNING OUR BUSINESS. THERE IS NO SENSE OF OVERREACTION, JUST A RECOGNITION OF WHAT'S HAPPENING IN THE MARKETPLACE AND A CONTINUED LEVEL OF ATTENTION TO RETURN, ALL KEY ASPECTS OF OUR BUSINESS,THAT BEING THE FUNDAMENTALS, HAVING A TREMENDOUS KNOWLEDGE OF OUR SPECIFIC MARKET PLACES AND UNDERSTANDING CLEARLY THE IMPACT OF OUR EXPOSURES AND MITIGATING RISK, ALL WHILE POSITIONING THE COMPANY FOR FUTURE GROWTH. WE THANK YOU FOR PAR TIS PATTING IN THE CALL. AND JASON, AT THIS TIME, I'D LIKE TO OPEN UP THE FLOOR FOR ANY QUESTIONS.

JASON?

EXCUSE ME, LADIES AND GENTLEMEN. IF THERE ARE ANY QUESTIONS, PRESS THE 1. IF YOUR QUESTION HAS BEEN ANSWERED OR YOU WISH TO REMOVE YOURSELF FROM THE QUEUE, PLEASE PRESS THE POUND KEY. ONE MOMENT, PLEASE, FOR OUR FIRST QUESTION. OUR FIRST QUESTION IS FROM DON SADETTI [PHONETIC].

A COUPLE OF QUESTION QUESTIONS. WHAT'S YOUR ASSET TOTAL '02 ASSET SALES GUIDANCE WOULD YOU SAY? I THINK IN MY NOTES I HAVE ABOUT 170 MILLION AS OF LAST QUARTER.

GEORGE?

AT 180 MILLION ON THAT?

180 IS THE GUIDANCE?

YES, 1-8-0.

OKAY. AND THE SECOND QUESTION THAT I HAVE IS ON YOUR REAL ESTATE JOINT VENTURE PAGE, THERE APPEARS TO BE SOME NON-OPERATING ACTIVITIES. IS THAT NEW OR... JUST ADDITIONAL DISCLOSURE?

JUST AN ADDITIONAL DISCLOSURE. ACTUALLY, YOU MIGHT RECALL WE HAVE HAD THAT SOMETIME AGO. AND WE DROPPED IT OFF THE SCHEDULE AT THE REQUEST OF PEOPLE ON THESE CALLS, WE HAVE INCLUDED THAT INFORMATION AGAIN.

OKAY. AND ONE LAST CLARIFICATION. THERE WAS A MENTIONING OF A LOSS OF 250 BASIS POINTS DUE TO CREDIT ISSUES OR BANKRUPTCY. IS THAT THIS QUARTER VERSUS A YEAR AGO? OR... WHEN -- FOR WHAT PERIOD IS THAT 250 BASIS POINT DECREASE?

IT'S A SIMPLE CALCULATION OF JUST ADDING UP THE SQUARE FOOTAGE OF THOSE INDIVIDUAL TENANTS AND DIVIDING IT BY THE AGGREGATE SQUARE FOOTAGE WE HAVE IN THAT MARKETPLACE.

AND ALSO TO CLARIFY THAT, DON, THAT WOULD BE FROM COMPARING THAT TO LAST YEAR AROUND THIS TIME.

OKAY. GREAT. APPRECIATE IT.

THANK YOU.

OUR NEXT QUESTION IS FROM MIKE MARR. PLEASE GO AHEAD.

GOOD AFTERNOON, GENTLEMEN. GERRY, YOU HAVE MADE A STATEMENT THAT YOU HAVE OUTPERFORMED YOUR MARKETS EACH OF YOUR submarkets. DO YOU HAVE THE DIRECT AND AVAILABILITY RATES BY MARKET? I I JUST HEARD ONE OVERALL RATE.

YOU DID. YOU HEARD IT COMBINED. YOU HEARD A POINT OF REFERENCE TO EACH INDIVIDUAL SUB MARKET ON WHAT THE RANGE WAS BUT WE DO TRACK OURSELVES ON AN INDIVIDUAL SUB MARKET BASIS AGAINST THE MARKET BOTH ON THE DIRECT VACANCY AND OVERALL VACANCY.

DO YOU AT LEAST HAVE IT BY REGION? BECAUSE YOUR PORTFOLIO OCCUPANCY IS STATED BY OBVIOUSLY PENNSYLVANIA AND THEN THE NEW JERSEY. UHM....

UHM, WE DID FOR THE PURPOSE OF THIS CALL.

I CAN LOOK THAT UP. ON JUST THE PENNSYLVANIA SIDE, WE ARE ABOUT 400 BASIS POINTS ON THE DIRECT BASIS. OUTPERFORMING THE MARKET. AND ON THE SOUTHERN NEW JERSEY, SOMEWHERE AROUND, UHM, 550 TO 600.

OKAY. WHAT MARKET VACANCY RATES DOES THAT IMPLY, THEN?

UHM... ON THE PENNSYLVANIA SIDE, IT INCLUDES OUR KING OF PRUSSIA, VALLEY FORGE, SOUTHERN ROUTE 202, MAIN LINE, ST. DAVID'S CON HOCK KIN,.

SO THE RATE YOU GAVE OUT OF 16 1/2 TO 17% AVAILABLE, WHAT MARKET DOES THAT APPLY TO? IS THAT ALL OF YOUR MARKETS?

YES.

OKAY. IT WOULD BE USEFUL TO HAVE THOSE RATES BY YOUR MAJOR MARKETS. ON THE NEXT CALL. UHM... SO WE CAN SORT OF FURTHER ANALYZE WHICH MARKETS YOU'RE PERFORMING BETTER THAN OTHERS THAN JUST HEARING THE 4% OF OUTPERFORMANCE... VERBALLY. ANYWAY, I'LL GET ON TO THE NEXT QUESTION. DO YOU KNOW WHAT PERCENTAGE OF YOUR PORTFOLIO IS AVAILABLE FOR SUBLEASE?

RIGHT NOW, WE HAVE SUBLEASE IN OUR PORTFOLIO OF JUST SLIGHTLY MORE THAN 3%.

3%?

RIGHT. ACTUALLY, IT'S AT 3.3% RIGHT NOW.

OKAY. WHAT'S -- WHAT DO YOU PLAN TO DO WITH THE EXPIRING SWAPS? THEY ARE COMING UP IN '02.

WE HAVE I BELIEVE IT'S 175 MILLION OF SWAPS THAT ARE EXPIRING IN SEPTEMBER OF '02. AND WE HAVE ENTERED INTO A COMPARABLE ANOTHER 175 MILLION OF SWAPS THAT LITERALLY START THE NEXT DAY AND RUN THROUGH THE MATURITY OF OUR LINE OF CREDIT AGREEMENT WHICH IS THROUGH JUNE OF 2004.

OKAY.

AND I THINK, MIKE IN TERMS OF WHAT WE PLAN ON DOING WITH THAT, WE HAVE SOME TIME TO REALLY VET THROUGH A LOT OF THE -- WHAT HAPPENS IN THE GENERAL ECONOMIC MARKETPLACE. SOME OF THE ANNOUNCEMENTS THIS MORNING, I WAS LOOKING AT ONE OF THE ECONOMIC ADVISORY OPINIONS AND THEY WERE TALKING ABOUT ALL OF A SUDDEN WHEREAS, YOU KNOW, A FEW WEEKS AGO THERE WAS A LOT OF TALK ABOUT RATES BEING RAISED THAT WITH PRICE INDEXES NOW BEING BELOW 1%, WITH INVESTMENT RATES NOT RISING AS FAST AS THE FED HAD WANTED, THAT THERE IN FACT MAY NOT BE THE INTEREST RATE INCREASE THEY WERE PROJECTING JUST A FEW WEEKS AGO. SO WHO THE HECK KNOWS. REALLY SPEND SOME TIME AND THINK THROUGH IT. SHORTLY UNDERSTAND THAT THERE WAS A VARIABILITY THAT COULD HAVE ON OUR EARNINGS. WE ARE ALSO CONTINUING TO ALWAYS ASSESS, YOU KNOW, FIXING THE LONGER TERM FINANCINGS ON A FIXED-RATE BASIS.

RIGHT.

SO I THINK WE LOOK AT, YOU KNOW, RECONSTITUTING THE SWAPS LATER THIS YEAR, LOOKING AT THE TOTAL FLOATING RATE DEBT AS PART OF OUR TOTAL ASSET BASE, AND DEPENDING ON HOW SOME OF THE ASSETS SALES CONTINUE TO PROGRESS, TRADING SOME ADDITIONAL CAPACITY, MAYBE DO SOME FIXED RATE EITHER UNSECURED OR SECURED FINANCINGS.

OKAY. YOU HAD MENTIONED THAT YOUR ACCOUNTS RECEIVABLE RESERVE WAS NOW 14% OF SOME NUMBER. WHAT IS THE DOLLAR AMOUNT OF THE RESERVES? IS THAT....

5 MILLION.

5 MILLION? OKAY. AND COULD YOU PROVIDE GUIDANCE ON G&A AND OTHER INCOME?

SURE. I THINK IN TERMS OF THE G&A, I'LL PICK UP THE PIECE, BRAD. THEN... YOU CAN CORRECT ME IF NECESSARY.

I THINK WE ARE LOOKING AT G&A RANGING BETWEEN 3.7 AND $4 MILLION A QUARTER. AND CERTAINLY WE ARE SPENDING A LOT OF TIME MAKING SURE THAT WE FINE-TUNE THAT NUMBER TO THE EXTENT WE CAN. BUT I KNOW WE HAVE HAD SOME ADJUSTMENTS TAKING PLACE IN COMPARING LAST QUARTER TO THIS QUARTER SO MAYBE WE CAN TALK ABOUT THOSE FOR A SECOND.

IN THE FOURTH QUARTER LAST YEAR IT WAS PROBABLY A LITTLE LOWER THAN OUR RUN RATE AT THE TIME. WE HAD DURING THE COURSE OF THE YEAR I HAD PROVIDED SOME TAX ACCRUALS RELATED TO OUR TAXABLE RESUBSIDIARY THAT TURNED OUT TO BE IN EXCESS OF WHAT WE NEEDED AT THE END OF THE YEAR. IN ADDITION, OUR BONUS ACCRUALS THAT WE HAD PROVIDED DURING THE YEAR WERE A LITTLE HIGHER THAN NECESSARY WHEN WE CLOSED THE BOOKS OF LAST YEAR. SO LAST YEAR IS PROBABLY ABOUT A HALF MILLION DOLLARS LOWER THAN WHAT OUR RUN RATE AT THAT TIME WOULD HAVE BEEN. BUT AS GERRY INDICATED, A APPROPRIATE RUN RATE GOING FORWARD SHOULD BE SOMEWHERE BETWEEN 3.7 AND $4 MILLION.

OKAY. HOW ABOUT OTHER INCOME?

OTHER INCOME -- OKAY. AS INDICATED EARLIER, WE HAD TERMINATION FEES OF ABOUT A MILLION DOLLARS DURING THE PERIOD. OUR OTHER INCOME WAS ABOUT 3.1 MILLION FOR THE QUARTER. OTHER COMPONENTS OF THAT INCLUDE ABOUT 800,000 IN INTEREST, ABOUT 600,000 IN THIRD PARTY MANAGEMENT FEES, AND ABOUT 80,000 IN LATE FEES.

OKAY.

AND WE WOULD EXPECT, YOU KNOW, ABOUT A MILLION AND A HALF WOULD BE THE ANTICIPATED RECURRING RUN RATE OF OTHER INCOME THAT -- IF YOU WILL, AS I INDICATED BEFORE THE TERMINATION FEE IS WHY IT'S RECURRING IN NATURE IS THE UNKNOWN PIECE BUT RECURRING FEES WE EXPECT TO BE AT LEAST ABOUT A MILLION AND A HALF.

OKAY. AND WHAT WAS CAPITALIZED INTEREST IN THE FIRST QUARTER?

924,000.

924,000.

JUST RELATED TO DEVELOPMENT PROJECTS.

OKAY. AND THEN THE THREE BUILDINGS THAT ARE ON THE REMAINING DEVELOPMENT PIPELINE, NONE OF THAT -- NONE OF THOSE TENANTS HAVE TAKEN OCCUPANCY YET, RIGHT?

I'M SORRY, MIKE, COULD YOU REPEAT THE QUESTION?

FOR THE THREE PROJECTS LISTED ON THE DEVELOPMENT PIPELINE, THOSE BUILDINGS ARE NOT COMPLETED... AND THEREFORE, NO TENANTS HAVE TAKEN OCCUPANCY YET?

OH, NO, NO. THE BERWYN 400 WAS DELIVERED IN THE MIDDLE OF FEBRUARY.

OKAY.

SO THE TENANTS IN OCCUPANCY THERE. AND THE SAME THING WITH 401 PLYMOUTH. IT WAS DELIVERED I THINK LATE JANUARY.

LATE JANUARY, YES.

OKAY. AND SO THE LEASING ON THERE, THOSE -- THAT INCOME IS ALREADY IN THE FIRST QUARTER NUMBERS?

NO. NOT ALL THAT SPACE THAT'S INDICATED ON THERE. SOME OF THAT PRERELEASE NUMBER HAS BEEN OCCUPIED AND SOME OF IT HAS NOT. THERE'S PROBABLY A LITTLE BIT OF INCOME IN THE FIRST QUARTER RELATED TO THAT BUT MOST OF THAT WILL START TO BE SEEN IN THE SECOND QUARTER OTHER LATER.

FOR BOTH BUILDINGS?

CORRECT.

OKAY. THAT'S IT. THANK YOU.

THANK YOU, MAKE.

OUR NEXT QUESTION IS FROM EDEN LEVINSON. GO AHEAD.

HI. CAN YOU TELL US WHAT'S BEHIND THE FFO ASSUMPTIONS FOR YOUR GUIDANCE?

SURE. I'D BE HAPPY TO. WE ASSUMED -- THIS GOES BACK TO THE -- JUST A CONFIRMATION THAT WE TALKED ABOUT IN THE LAST CALL. BUT WE ESSENTIALLY ASSUMED FOR THE YEAR A 200 BASIS POINT DECLINE IN OCCUPANCY, FLAT SAME STORE GROWTH, 2.5 CENTS COMING IN FROM UNLEASED SPACE IN OUR DEVELOPMENT PROJECTS, THE OTHER INCOME NUMBER, BRAD, WAS?

ABOUT A MILLION AND A HALF PER QUARTER.

RIGHT.

SO 2.5 CENTS PER QUARTER IS COMING FROM UNLEASE -- OR IS THAT A -- THAT'S A NEGATIVE YOU'RE SAYING?

NO, NO. I'M SORRY. WITHIN OUR 2002 PROJECTION -- FFO PROJECTIONS, WE ASSUMED THAT WE WERE UNABLE TO LEASE UP WHAT WAS THEN CURRENTLY UNLEASED SPACE IN OUR DEVELOPMENT PROJECTS. AND THAT THAT LEASING ACTIVITY WOULD GENERATE ABOUT 2.5 CENTS OF FFO THAT'S INCLUDED IN OUR ESTIMATES.

OKAY.

I THINK THEY WERE THE MAJOR DRIVERS. LEVERAGE NEUTRAL CAPITAL RECYCLING PLAN, I THINK THAT'S PRETTY MUCH IT, YEAH.

OKAY. THANKS.

OUR NEXT QUESTION IS FROM LEWIS FORBES. GO AHEAD.

A LOT OF THE QUESTIONS HAVE BEEN ASKED. BUT THE STRAIGHT LINE RENT RUN RATE, CAN WE USE Q1 OR HAS THAT BEEN CHANGED BY YOUR ASSET CHANGES?

NEGOTIATION LEWIS. IT'S ABOUT 1.4 MILLION A QUARTER AND IT'S BEEN CONSISTENTLY BETWEEN 1.4 AND 1.6 MILLION A QUARTER. NO LOUIS ] SO THAT'S A GOOD RUN RATE GOING FORWARD.

THANK YOU, GREAT. YOU USED TO SHOW AN ITEM CALLED CAPTIONED AMORTIZATION OF PREFERRED SHARE DISCOUNT. WHAT'S HAPPENED TO THAT?

ON THE [ INDISCERNIBLE ] ....

OFF THE TOP OF MY HEAD, I DON'T RECALL BECAUSE I CAN'T SEE IT NOW.

ARE YOU SURE IT WAS THERE?

LOUIS, WE'LL INTO THAT AND SEE WHAT WE DID.

I GUESS YOU PROBABLY SAW IT ON THE 10-K OR SOMETHING FROM THE END OF THE YEAR WHEN YOU HAVE AN EQUITY ROLL-FORWARD WHICH IS NOT PROVIDED ON A QUARTERLY BASIS. AND THAT CONTINUES TO BE OUT THERE, IT'S JUST A DIDN'T AN ADJUSTMENT IN THE EQUITY. IT'S NOT HITTING THE P&L ON AN ANNUAL BASIS. BUT I THINK THE ONLY PLACE YOU SEE IT, LOUIS, IS ANNUALLY.

OKAY. THANK YOU FOR THAT. THE TERMINATION FEES THIS QUARTER SOUND LIKE THEY WERE A SURPRISE COMPARED 20 YOUR GUIDANCE AT THE BEGINNING OF THE YEAR. BUT YOU'RE HOLDING YOUR GUIDANCE FIRM. DOES THAT MEAN THAT SOME OF EVERYTHING ELSE IS SLIGHTLY SOFTER THAN YOU WOULD EXPECT IT?

NO. I THINK THAT'S A GOOD QUESTION. THE TERMINATION FEES WEREN'T A SURPRISE. I THINK WE MADE VERY CLEAR AT THE BEGINNING OF THE YEAR IS THAT WE WEREN'T GOING TO COUNT ON THAT IN OUR PROJECTIONS. SO IF THEY WERE TO COME, THEY WOULD WIND UP BEING HOPEFULLY AN UPSIDE SURPRISE TO OUR FFO TARGET RANGE. THE WAY WE LOOK AT IT QUITE FRANKLY IS, YOU KNOW, THE PORTFOLIO PERFORMED VERY MUCH IN LINE WITH WHAT WE HAD PROJECTED DURING THE FIRST QUARTER. WE MADE GREAT PROGRESS ON CLICKING AWAY SOME MORE RENEWALS. WE ARE GETTING GOOD GROWTH RATES ON THOSE. AS WE TALKED ON THE CALL, WHAT WE ARE SEEING CAPITAL COSTS, AT LEAST START THE TREND DOWN. BUT THAT'S GOING TO VARY BASED UPON INDIVIDUAL TRANSACTIONS. I THINK THE REASON WE HAVE NOT MOVED ESTIMATES UP IS A FUNCTION OF, NO. 1, IT'S A TOUGH MARKET TO BE OVERLY AGGRESSIVE ON ASSUMPTIONS ON. I MEAN, UHM, WE'RE FIGHTING EVERY DAY ON THE LEASING MARKETPLACE TO MAKE SURE WE GET THE RIGHT DEALS DONE EX-SPEC DISHESLY ON THE RIGHT TERMS. THERE IS -- EXPEDITIOUSLY ON THE RIGHT TERMS. THERE ARE ANY NUMBER OF VARIABLES THAT COULD AFFECT THE OVERALL PERFORMANCE OF ANY REAL ESTATE COMPANY, NOT JUST BRANDYWINE. SO I THINK AS WE LOOKED AT IT, WE HE WERE DELIGHTED THAT, YOU KNOW, THE FIRST CALL NUMBER AROUND 56 CENTS FOR THE QUARTER, WE NAILED BASED UPON THE OPERATIONS OF THE COMPANY. AND THAT ANY ADDITIONAL ITEMS THAT MIGHT ADD TO THAT WOULD BE ADDITIVE BUT WE CERTAINLY AREN'T GOING TO BACK ON THAT GOING FORWARD. SO I DON'T WANT TO MISINTERPRET US NOT MOVING UP ESTIMATES AS ANY SIGN OF WE THINK THERE IS ANY WEAKNESS WE CAN POINT TO RIGHT NOW. I THINK WE JUST WANT TO BE GENERALLY COULD BE SERVEIVE AS GEORGE TOUCHED ON, CONSERVATIVE. I KNOW I MENTIONED IN ONE OF MY COMMENTS, THE ASSET SALE PROGRAM HAS BEEN MOVING AHEAD TO THE -- AT A VERY NICE CLIP AND WE HAVE HAD FROM A REAL ESTATE IMPEACHABLE, MANAGEMENT STANDPOINT IT'S BEEN A WONDERFUL RESULT, THE REAL ESTATE PORTFOLIO, IN TERMS OF ELIMINATING HIGH-RISK ROLLOVER AND CAPITAL EQUATIONS. AS WELL AS STREAMLINING OUR MARKET POSITIONING. BUT THAT IS GOING TO HAVE A LITTLE BIT OF DILUTIVE EFFECT AS IED IN THE SECOND AND POTENTIALLY THIRD QUARTER.

RIGHT. OKAY. UHM, COUPLE MORE QUICK QUESTIONS. YOUR ASSETS HELD FOR SALE DECLINED ONLY 2 MILLION DURING THE QUARTER. YOU HAD A FAIR BIT OF DISPOSITIONS. HAS THE PICTURE BEEN EVOLVING RECENTLY FOR YOU IN TERMS OF WHAT YOU'RE GOING TO SELL OR... WHY THE CHANGES THERE?

THE ASSETS HELD FOR SALE IS REALLY GOES BACK TO THE STATEMENT 144 THAT WE ALLUDED TO BEFORE. IT'S GOING TO BE CREATING A GREAT DEAL OF CONFUSION IN THE FINANCIAL STATEMENTS OR AS THEY ARE PRESENTED. BASICALLY, WHAT HAPPENS FIRST QUARTER OF ADOPTION, WE IDENTIFY ALL THOSE ASSETS THAT WE BELIEVE MET THE CRITERIA THAT THAT STATEMENT WHICH IS THE ABILITY TO SELL THE PROFITABILITY AND ALL THOSE TYPE OF THINGS AND CLASSIFIED THEM IN THE STATEMENT ACCORDINGLY. THAT TOTALED ABOUT $88 MILLION. WHAT THE STATEMENT OBLIGATES TO YOU DO IS GO BACK AND TAKE THOSE SAME ASSETS IN THE COMPARABLE PERIOD, THIS CASE BEING 12/31, AND CLASSIFY THOSE ACCORDINGLY. I THINK THE BIGGEST DIFFERENCE BETWEEN THE TWO NUMBERS FROM PERIOD TO PERIOD IS REALLY JUST DEPRECIATION EXPENSE TAKEN ON THOSE ASSETS DURING THAT QUARTER. IT'S THE SAME ASSETS IN BOTH PERIODS.

OKAY. THANK YOU VERY MUCH FOR THAT AND THANK YOU, ALSO, BY THE WAY, FOR PAGE 8 IN YOUR PACKAGE. I FOUND IT VERY HELPFUL.

YOU'RE WELCOME.

UHM, AND THAT'S IT FOR MY QUESTIONS.

THANK YOU.

OUR NEXT QUESTION IS FROM STUART SEELEY. PLEASE GO AHEAD.

GOOD AFTERNOON. WE HAVE SEEN SOME DATA WHICH SUGGESTS THAT THERE IS ACTUAL A A LY A STAIR-STEP IN VACANCY IN THE PHILADELPHIA MARKET FROM THE FOURTH TO THE FIRST QUARTER. IS THAT YOUR SENSE OR HAS BEEN THE TREND UP IN VACANCY BEEN MORE GRADUATED?

WHAT DO YOU MEAN A STAIR-STEP?

LOOKS LIKE THE VACANCY GOING UP THROUGH THE 2001 ABOUT 100 BASIS POINTS A QUARTER AND THEN TORTO SUGGESTS THE VACANCY INCREASES FROM THE FIRST FOURTH QUARTER TO THE FIRST QUARTER ABOUT 400 BASIS POINTS WHICH SEEMS LIKE A HECK OF A BIG STEP FOR YOUR MARKETS WHICH ARE USUALLY PRETTY STABLE.

YEAH. STUART, UHM, JEFF HERE AS WE HAVE TALKED ON THE SIDELINE, THE INTEGRITY OF INFORMATION, THE REAL ESTATE REPORTING MARKETS IS... IS NOT 100%. WE HAVE BEEN BENCHMARKING OURSELF AGAINST WHAT WE BELIEVE TO BE THE BEST RECORDS IN OUR MARKET PRODUCED BY CUSHMAN AND WAKEFIELD. AND IF YOU LOOK AT IT OVER THE LAST COUPLE OF QUARTERS AND/OR YEARS, IT IS NOT BEEN ON A 400 BASIS POINT BASIS AT ALL. IT'S FIRST QUARTER '02 EXCLUDES SOUTH JERSEY. I MENTIONED DURING THE CONFERENCE CALL, WE WENT FROM 12.7 TO 14.1 ON A DIRECT BASIS. THE PREVIOUS YEAR IN 2000, IT WAS 10.3 TO 12.7. ALL INCREMENTAL STEPS, NO BIG JUMP IN QUARTER TO QUARTER AND WHEN YOU INCLUDE SOUTH JERSEY, THAT MARKET HAS QUITE FRANKLY BEEN VERY STABLE OVER THE LAST YEARS BECAUSE OF NO CONSTRUCTION ACTIVITY. IT'S BASICALLY GONE JUST THE LAST 99, 10.1 TO 10.6 TO 12.4 TO 13.6.

OKAY. AND I MAY HAVE MISSED IT, BUT DID GEORGE SAY WHAT THE AVERAGE CAP RATE WAS ON THE ACQUISITIONS THAT YOU MADE?

ON THE ACQUISITIONS, STUART, IT WAS 10%.

OKAY. AND, UHM, BRAD, I REALLY APPRECIATE PAGE 8 AS WELL WITH THE DISCLOSURE ON THE DISCONTINUED OPERATION. AND I GUESS IF I WAS TO TAKE OUT OF THE NO HERE ABOUT 10.4 OF THE-YEAR-OLD ON THE 117 MILLION THAT YOU SOLD TAKE OUT OF THE NOI HERE, WOULD THAT BASICALLY GET ME THE IMPLIED CAP RATE THAT YOU THINK YOU'RE GOING TO SELL, THE $88 MILLION ON YOUR BALANCE SHEET AT, THAT YOU THINK YOU'RE GOING TO SELL?

I'M SORRY, STUART. WOULD YOU REPEAT THAT?

SURE. IF WE WERE TO ASSUME THAT YOU SOLD YOUR 117 MILLION OF -- YOUR $117 MILLION OF SALES THAT YOU ACHIEVED DURING THE QUARTER WAS DONE AT THE 10-4, WHICH WOULD BE APPROXIMATELY... UHM... ABOUT 3 MILLION BUCKS, AND IF WE LOOK AT WHAT THE QUARTERLY RUN RATE IS IN THE -- FOR A FULL QUARTER OF ABOUT 23, YOU BASICALLY GET TO ABOUT $8 MILLION OF NOI IN RESIDUAL WHICH I'M PRESUMING IS ONLY ALLOCABLE TO THE ASSETS THAT YOU HAVE LEFT HELD FOR SALE WHICH IMPLIES ABOUT A -- WHICH IMPLIES THAT YOU'RE ASSUMING THAT YOU WILL SELL THE 88 MILLION ON YOUR BALANCE SHEET FOR 10 CAP, AS WELL? IS THAT ABOUT THE RIGHT ARITHMETIC?

WELL, I'M NOT SURE I CALL FOLLOWED ALL THE DIFFERENT PIECES THERE STUART. BUT I THINK WHAT WE HAVE LOOKED AT IS OUR DISPOSITION CAP RATES HAVE REALLY RANGED FROM THE HIGH 8s TO, YOU KNOW, NORTH OF 10 1/2. THAT'S BASED UPON WHETHER WE ARE SELLING OFF PROSPECTIVE NOI, IN-PLACE NOI AND THE SPECIFIC CHARACTERISTICS. BUILDING. WE CERTAINLY WOULD ANTICIPATE THAT WHAT WE SELL IS GOING TO WANT TO BE IN THAT SAME RANGE AND WE HAVE HAD SOME VERY GOOD SUCCESS IN SELLING CAP RATES TO SOME USERS, YOU KNOW, A NUMBER OF THE TRANSACTIONS BELOW 9%, UHM, OF THE MULTI-TENANT HIGHER RISK PROPERTIES WITH A LOT OF ROLLOVER, YOU KNOW, THEY HAVE BEEN MIGRATING NORTH OF 10. SO I CAN'T SIMPLY ADDRESS ALL THE DIFFERENT PIECES THAT YOU WALK THROUGH. BUT I THINK THAT SHOULD GIVE YOU SOME IDEA OF WHAT WE ARE LOOKING TO ACHIEVE.

VERY GOOD. THANK YOU.

OUR NEXT QUESTION IS FROM ANATOLY PEVNEV. PLEASE GO AHEAD.

THIS IS ACTUALLY FRANK GRAYWOOD. QUESTION FOR THE DISCONTINUED OPERATIONS. THE INCOME FROM THE DISCONTINUED OPERATIONS. HOW MUCH OF THE INCOME, UHM, IN THE FIRST QUARTER OF THIS YEAR WAS ACTUALLY FROM THE SOLD PROPERTIES AND HOW MUCH SHOULD BE CONTINUING FOR THE REST -- FOR THE SECOND QUARTER?

I DON'T HAVE EXACTLY THE BREAKDOWN. WHAT I CAN SHARE WITH YOU, OUT OF THE NUMBER OF THE PROPERTIES THAT WE HAVE IN THOSE NUMBERS, IT REPRESENTS ABOUT 47 DIFFERENT PROPERTIES, 20 OF THOSE HAVE BEEN SOLD AND ABOUT 27 OF THOSE REPRESENT HELD TO BE SOLD. THAT ARE ANTICIPATED TO CLOSE AT VARIOUS TIMES THROUGHOUT THE QUARTER. SO I DON'T HAVE AN EXACT PERCENTAGE SPLIT FOR YOU TO BREAK THAT DOWN BUT WE CAN TRY TO LOOK AT SOMETHING WHILE WE ARE HAMMING THE REST OF THE CALL HERE.

THAT'S HELPFUL. THANK YOU.

OUR NEXT QUESTION IS FROM CHRIS HALEY. PLEASE GO AHEAD.

GOOD AFTERNOON.

HI, CHRIS.

I WOULD SUGGEST KEEPING THE RECONCILIATION PAGE IN THE SUPPLEMENTALS AS FAR FORWARD AS POSSIBLE, GIVEN THE ACCOUNTING REQUIREMENTS NOWADAYS.

OKAY.

CHRIS, INCLUDING SOUTHERN NEW JERSEY COMBINED OR DO YOU WANT THEM SEPARATE?

SEPARATE, PLEASE.

OKAY. ON THE PENNSYLVANIA SIDE, WHAT WE HAVE PUT TOGETHER AND REVIEWED THROUGH THE VARIOUS DIFFERENT REPORTS IS YOU SEE A DIRECT RAY CANCY RATE IN THE FOURTH QUARTER EXCLUDING SOUTHERN NEW JERSEY, JUST THE P.A. SUBURBS OF ABOUT 14.1%, OF DIRECT VACANCY.

WHEN IS THAT?

MARCH 31, '02.

AND YEAR END IT WAS?

YEAR END, IT WAS 12.7.

I'M SORRY?

I'M SORRY?

GO AHEAD.

AND HOW ABOUT THOSE NUMBERS AS OF YEAR END 2000?

10.3.

OKAY. AND THEN WITH SUBLET?

11.4.

IT'S NOT THAT BAD!

16.7 AND 17.1.

17.1. ALL RIGHT. PARDON MY LITTLE BOY.

TEACHING HIM YOUNG, CHRIS.

GOT TO GET EXCITED ABOUT THE -- ABOUT GETTING TO 20!

THAT SFAS 142 GETS EVERYBODY GOING!

IT HELPS WHEN I PUT HIM TO SLEEP! THAT FAS 144.

DID YOU INCLUDE SOUTHERN NEW JERSEY IN OUR MARKET STATS.

YES.

WHICH WE THINK IS IMPORTANT BECAUSE A LOT OF THE MARKET INFORMATION IS PRESENTED BY SOME OF THESE NATIONAL GROUPS DOES INCLUDE WOULD BE 13.6 FOR THE FIRST QUARTER '02, COMING FROM 12.4 IN '01. AND 10.6 AT THE END OF O'O'. AT THE END OF '00.

SO IF YOU LOOK AT THOSE NUMBERS IN RELATION TO YOUR OCCUPANCY CHANGES, WHICH YOU PROVIDED IN YOUR SUPPLEMENTAL ON ON PAGE 14, I GUESS, HOW -- HOW WOULD YOU -- I MEAN, I SEE ROUGHLY 96.8 IN PENNSYLVANIA GOING TO 91.2. NIECE OFS THAT'S 560 BASIS POINTS. THAT'S, UHM, THAT WOULD LEAD ME TO BELIEVE THAT YOU GUYS HAVE ACTUALLY HAVE LOST A LITTLE MORE IN TERMS OF OCCUPANCY IN THE MARKET. IS THAT A FAIR ASSESSMENT? BECAUSE I KNOW YOU CHANGED OCCUPANCY CALCULATIONS.

WE DID CHANGE THE OCCUPANCY CALCULATIONS. BUT I THINK THE WAY WE LOOK AT IT IS, UHM, YOU KNOW, WE SPECIFICALLY SPOKE EARLIER ABOUT LOSING ROUGHLY 250 BASIS POINTS DUE TO SOME OF THE BANKRUPTCIES. WHICH IS CERTAINLY HAD AN IMPACT ON WHAT WE HAVE DONE IN PENNSYLVANIA. BUT WE TAKE A LOOK AT EACH OF THE DIFFERENT submarkets IN TERMS OF WHERE WE ARE FROM AN OCCUPANCY STANDPOINT VERSUS THAT SUB MARKET. I THINK WITH THE EXCEPTION OF THE MAIN LINE AREA THAT JEFF TOUCHED ON, WE FEEL LIKE WE HAVE DONE A PRETTY GOOD JOB AND CERTAINLY I THINK THE NUMBERS SUPPORT THAT.

WHAT MAY ALSO BE A LITTLE BIT CONFUSING BETWEEN LOOKING AT 10-K ON THE REPORT IS THAT THE NUMBERS THAT REPORTED ARE THE MARKET DON'T NECESSARILY REFLECT OCCUPANCY NUMBERS. SO IF A SPACE IS -- AFTER A CUSHMAN MAKES A PHONE CALL AND IT'S REPORTED BACK THAT THE SPACE HAS BEEN LEASED, THEY TAKE IT OFF THEIR BOOKS. THAT DOESN'T MEAN IT'S BEEN OCCUPIED DURING THAT QUARTER. SO THE COMPARISON THAT WE TRY AND PRESENT ON THE MARKET IS AN APPLES-TO-APPLES ONE WHICH BASICALLY STATES THAT WHATEVER IS PERCEIVED TO BE AVAILABLE IN THAT MARKETPLACE, WHETHER OR NOT IT'S OCCUPIED OR NOT, COMPARED TO WHAT WE CURRENTLY HAVE, ON THAT SAME BASIS, WHETHER OR NOT IT'S OCCUPIED.

SO IT MIGHT DIFFERENT SLIGHTLY FROM WHAT YOU SEE IN SOME OF THE REPORTS. BECAUSE THAT'S REPORTED NOW ON AN OCCUPANCY BASIS.

OKAY. AND THE OTHER QUESTION HAD TO DO WITH YOUR DEVELOPMENT PIPELINE. THE PROJECT THAT IS WERE DELIVERED IN THE FIRST QUARTER IN 30 AND 40% LEASED, WAS THERE A DILUTIVE I WANT PACKETS TO RESULTS IN THE IMPACT TO RESULTS IN THE QUARTER?

NO. WHAT WAS DELIVERED DURING THE DEVELOPMENT PROJECT WAS 100% LEASE WAS THE -- THE ICT PROPERTY. THAT ABOUT. THE OTHER TWO THAT WE REFERRED TO, CERTAIN LIMITED SPACES, THOSE BUILDINGS WERE AVAILABLE TO BE OCCUPIED AND WERE SOME LIMITED LEASING IN THOSE BUT THEY ARE NOT -- THEY HAVE NOTHING FULLY DELIVERED. IF I LOOK AT THE YIELD YOU'RE PROVIDING, STILL AT 12-4, THAT'S AN UNLEVERED YIELD?

CORRECT.

THE FOLLOWING PAGE PROVIDES YOUR OPERATING AND DEVELOPMENT JOINT VENTURES WHICH IF I SAW THE NUMBERS CORRECTLY WERE IN THE 16 TO 17% LEVERED RANGE?

CORRECT.

WHICH I GUESS DOING -- IF I KIND OF BACK INTO AN UNLEVERED YIELD ON YOUR JOINT VENTURES, WHERE WOULD THAT COME OUT IN RELATION TO YOUR WHOLLY OWNED UNLEVERED YIELDS?

I THINK THEY HAVE BEEN FAIRLY COMPARABLE. I DON'T KNOW THE EXACT NUMBER. BUT I MEAN, YOU KNOW, TYPICALLY WHEN WE HAVE DONE THOSE VENTURES WE INVEST ON THE PREFERRED BASE, PUT OURSELVES IN A SOMEWHAT SECURE POSITION WITH THE COUPON. SO WE TEND TO LOOK AT WHAT OUR RETURN ON INVESTED CAPITAL IS THERE. WHICH TENDS TO EQUATE TO THE CAPITAL STRUCTURE OF THAT JOINT VENTURE. BUT PARTICULARLY, I KNOW WE HAVE UNDERWRITTEN SOME OF THE JOINT VENTURE DEVELOPMENTS. THEY HAVE BEEN, YOU KNOW, BETWEEN THE 11 AND 12% RANGE. MAYBE A LITTLE BIT HIGHER IN ONE CASE.

AND IN THE PROJECTS THAT ARE SET FOR DELIVERY, ON THE JOINT VENTURE SIDE, HAVE YOU AND YOUR PARTNER HAS TO RESET EXPECTATIONS GIVEN THE LEASING LEVELS AS TO THOSE TWO OR THREE PROJECTS?

I THINK THERE IS REALLY ONLY ONE, WHICH IS.

WHICH IS A TO YOUR BRIDGE IN CONCHOHOCKEN AND WE HAVE HAD SOME DISCUSSIONS ON RESETTING EXPECTATIONS THERE.

AND WHAT MAGNITUDE?

I THINK WE HAVE SEEN YOU KNOW, RENTS WERE INITIALLY WERE PRO FORMED IN THE LOW TO MID-30s AND I THINK WE ARE PROJECTING SOMETHING IN THE HIGH 20s TO LOW 30s NOW. SO... IT'S PROBABLY REDUCED OUR EXPECTED YIELD THERE, PROBABLY BY ABOUT 100 BASIS POINTS.

MM-HM. OKAY.

THE OTHER TWO PROJECTS, THOUGH, CHRIS, I UNDERSTAND WE HAVE -- THERE ARE BASICALLY JOINT VENTURE LAND HOLDINGS WHERE WE HAVE $400,000 INVESTED.

OKAY.

THEY ARE NOT REALLY SCHEDULED FOR DELIVERY AT ANY TIME IN THE NEAR FUTURE.

AND GERRY, LAST QUESTION HAS TO DO WITH THE GUIDANCE, AS WELL. IT DOESN'T SOUND AS THOUGH YOU'RE CHANGING ANY OF YOUR MAJOR COMPONENTS OF GUIDANCE BUT YOU INDICATED YOU FELT MORE COMFORTABLE AND MAYBE YOU WERE IN A DIFFERENT PLACE VERSUS A COUPLE OF MONTHS AGO. AND YOU BEAT THE CONSENSUS NUMBERS BY 4, 5 CENTS, WHATEVER IT MIGHT BE. AND YOU'RE STILL KEEPING NUMBERS AT THE LOW END SO I'D LIKE TO ASK THE QUESTION AGAIN... MAYBE IF YOU CAN EXPAND UPON WHETHER OR NOT YOU EXPECT LESS LEASE TERMINATION FOR THE NEXT COUPLE QUARTERS OR LESS OTHER INCOME... OR ARE YOU LOOKING FOR LESS THAN A REBOUND IN THE SECOND HALF, WHATEVER IT MIGHT BE.

WE HAVE NOT MOVED UP OUR EXPECTATIONS FOR OTHER INCOME IN ANY OF THE SUCCESSIVE QUARTERS FOR 2002. I THINK WE ARE COMFORTABLE WITH WHERE OUR PROJECT CHAMPS ARE RIGHT NOW AND REALLY THAT INCOME IS SO VARIABLE THAT IT'S A WONDERFUL SURPRISE WHEN IT HAPPENS. BUT WE ARE NOT COUNTING ON MAKING THAT AS PART OF OUR NUMBERS NECESSARILY.

IN TERMS OF THE EXPECTATION OF THE PERFORMANCE OF THE PORTFOLIO, YOU KNOW, WE HAVE HAD A GOOD QUARTER. AND WE CERTAINLY AS JEFF INDICATED WE ARE SEEING GOOD ACTIVITY THROUGH THE PORTFOLIO BUT WE ALSO AS I MENTIONED, YOU KNOW, WE ARE SEEING DELAYED OCCUPANCY DUE TO EITHER TENANT INDECISION OR INCREASE IN ARCHITECTURAL PLAN REQUIREMENTS BY A COUPLE TOWNSHIPS WHO NOW HAVE TO GO THROUGH ANOTHER STEP THAT DELAYS THE TENANT PLANNED SIGNOFF. SO I THINK WE FEEL GOOD ABOUT THE ABILITY OF THE PORTFOLIO TO CONTINUE TO PERFORM. AS I TOUCHED ON, OUR ASSET SALE PROGRAM IS RUNNING A BIT AHEAD OF PACE. GEORGE INDICATED THE COMPANY'S POSITION THAT WE ARE NOT GOING TO COMPROMISE OUR INVESTMENT STANDARDS SIMPLY TO REDEPLOY THAT CAPITAL. AND I ALSO DID INDICATE A BUTUP OF THE COMPANY TOWARDS POTENTIAL REDUCING OUR LEVERAGE FROM ABOUT 47% DOWN POTENTIALLY TO THE CLOSE TO 45% RANGE. WHEN YOU REALLY COMBINE THE OVERLAY OF JUST VERY MUCH AN UNCERTAIN CLIMATE, YOU KNOW, NO ONE REALLY ANTICIPATED THAT VANGUARD WOULD PUT AS MUCH SPACE AS THEY PUT BACK ON THE MARKET A COUPLE QUARTERS AGO AND THEY PUT 400,000 SQUARE FEET BACK ON THE MARKET. NO ONE ANTICIPATED THE PNC WOULD PUT 170,000 FEET BACK ON THE MARKET. THEY PUT THAT BACK ON. SO... I THINK, YOU KNOW, WE HAVE BEEN FAIRLY COULD BE SEVENIVE IN PROJECTING -- CONSERVATIVE IN PROJECTING OUR SAME STORE NUMBERS AND OUR OCCUPANCY TARGETS FOR THE YEAR. I THINK WE ARE DELIGHTED THAT WE HAVE BEEN ABLE TO MEET THOSE EXPECTATIONS FOR THE FIRST QUARTER. AND IF THERE IS A POSITIVE SURPRISE DUE TO OTHER INCOME COMING IN OR SOME OF THESE OTHER PIECES, THEN THAT WILL BE GREAT. BUT I THINK THAT AT THIS POINT IN TIME, CERTAINLY AT THIS POINT IN THE CYCLE, I DON'T THINK IT MAKES MUCH SENSE TO BE GIVING PEOPLE EXPECTATIONS OF GREATER GROWTH THAN WE REALISTICALLY EXPECT.

UNDERSTOOD. THAT'S A FAIR POINT IN TERMS OF STAYING AT THE LOW END OF CONSERVATISM AT THIS POINT IN TIME. I JUST NOTICED THE QUESTION ON PROBABLY THE SALES THAT WERE DONE SUBSEQUENT TO THE QUARTER. WHERE WERE THOSE SALES? WERE THOSE THE --.

THEY ARE ACTUALLY ON LONG ISLAND AND ONE IS OUT HERE IN NEWTOWN SQUARE, USER SALE.

OKAY. SO THE LONG ISLAND IS NOT GOING TO BE ALL AT ONCE, IS IT A STAGED SALE?

THAT'S CORRECT. THERE ARE TWO MAJOR CHARGES OF SALES. ONE HAS HAPPENED NOW. ANOTHER IS UNDER AGREEMENT.

UNDER FIRM AGREEMENT WITH THE CONTRACT TARGET.

THESE ARE SEPARATE BUYERS AND IS THERE ANY REASON THAT YOU WOULD PUT THEM UP VERSUS DO IT ALL AT ONCE.

I THINK THERE WERE A COUPLE OF OTHER BUYERS WITH THE USER SALES.

WE HAD SOME ONE-OFFS PRIMARILY, THE USERS. AND THE OTHER THE TWO MAJOR TRANSACTIONS THAT REPRESENT THE BULK OF THE PORTFOLIO, THOUGH. BUT WE DID HAVE SOME OF THE TENANTS THAT ACTUALLY HAD BEEN IN PLACE FOR EXTENDED PERIOD OF TIME. IT IS OBVIOUSLY GOING BACK TO THE USERS MAKES THE MOST SENSE. SO WHEN WE ELECTED TO EXIT THE MARK, WE WENT TO SOME OF THE TENANTS WHO LITERAL HAVE BEEN IN PLACE SOME 10, 20 YEARS IN CASES SAYING YOU HAVE BEEN A TENANT ALL THESE YEARS. WOULD YOU WOULD YOU LIKE TO BUY THE BUILDING AND TYPICALLY GET A HIGHER PRICE FROM THE USER THAN AN INVESTOR. SO WE HAD GREAT RESULTS WITH THAT.

OKAY. AND THOSE SALES, THE CAP RATE THAT WAS PROVIDED ON THE SALES IN A PRIOR -- IN YOUR PREPARED COMMENTS AND I GUESS IN Q & A, DID THAT INCLUDE THE Q2 SALES SO FAR?

WELL, IT -- FOR YEAR-TO-DATE, CHRIS, THE CUMULATIVE YEAR TO DATE IT'S ABOUT 10.4 ON THE CAP RATE. BUDGET NOI, ABOUT 9.1 ON IN PLACE NOI. AND I CAN GIVE YOU THE Q1 IF YOU WOULD LIKE THAT, AS WELL.

THAT'S OKAY. THAT'S HELPFUL. I'LL TOUCH BASE OFF LINE. THANKS A LOT. KEEP IT UP.

CHRIS, THANKS.

ONCE AGAIN, LADIES AND GENTLEMEN, IF YOU DO HAVE A QUESTION, PLEASE PRESS 1 AT THIS TIME.

WE HAVE A QUESTION FROM JOHN STUART. PLEASE GO AHEAD.

HI, GUYS. I KNOW THE CALL'S GONE ON FOR A WHILE SO I'LL TRY TO KEEP IT BRIEF. GERRY HAD MENTIONED THAT YOU'RE AHEAD OF THE CURVE AS FAR AS YOUR 2003 ROLLOVER. COULD YOU QUANTITY THAT THAT A BIT?

SURE.

WE ARE LOOKING FOR OUR PAPERS.

GO AHEAD. IN TERMS OF THE -- I MEAN, WE HAVE ABOUT, YOU KNOW, 12% OR SO OF THE PORTFOLIO ROLLING IN IN '03 AND I THINK AS WE DID LAST YEAR AT THIS TIME RELATIVE TO '02 RENEWALS, WE ARE DOING THE SAME THING WITH '03, WE ARE GETTING IN FRONT OF THE LARGER TENANTS PARTICULARLY AND TALKING ABOUT SOME EXTENSION. SO DON'T REALLY HAVE ANYTHING QUANTIFIABLE TO REPORT RIGHT NOW. OTHER THAN THAT THE DISCUSSIONS ARE GOING ON... WE FEEL PRETTY GOOD ABOUT SOME OF THE PRELIMINARY FEEDBACK WE GOT. BUT THERE IS ALSO AGAIN TO BE FORTHRIGHT, THERE IS NOT A TREMENDOUS MOTIVATION ON THE PART OF A LOT OF TENANTS TO SIGN UP EARLY. I THINK THEY HAVE A GENERAL EXPECTATION THAT THINGS MAY GET ARGUABLY WEAKER BEFORE THEY GET BETTER. THAT COMBINED WITH THE FACT THAT FRANKLY, SOME OF THEM AREN'T SURE WHAT THEIR LONG TERM PLANS ARE RIGHT NOW. BUT AS WE DID LAST YEAR AND THE YEAR BEFORE THAT AND THE YEAR BEFORE THAT, WE GET OUT IN FRONT OF THOSE TENANTS VERY EARLY IN THE PROCESS TO MAKE SURE THAT THEY -- YOU KNOW, WORST CASE, WE GET A VERY EARLY WARNING SYSTEM IN PLACE ON WHAT TENANTS DESIRES ARE.

OKAY. AND THEN NEXT WITH REGARDS TO THE DISPOSITIONS. HOW MUCH ARE YOU FORECASTING IN TERMS OF GAINS ON THE BALANCE OF SALES?

THE GAIN ON THE BALANCE OF THE SALES WE HAVE, UHM, ABOUT ANOTHER $4 MILLION.

AND THEN FINALLY, WHAT DO YOU HAVE THE PROCEEDS EARMARKED FOR? HOW MUCH OF THAT IS GOING TO GO DOWN TO PAY DOWN DEBT AND WHERE DO YOU LOOK TO EMPLOY THE BALANCE?

WELL, I MEAN, RIGHT NOW, WHAT WE HAVE PURCHASED ABOUT $70 MILLION THUS FAR THIS YEAR. WE HAVE SEVERAL OTHER PROJECTS UNDER AGREEMENT. SO WE HAVE REALLY KIND OF LOOKED AT, YOU KNOW, SOMEWHERE AROUND A TARGETED INVESTMENT OF CLOSE TO $100 MILLION OCCURRING, YOU KNOW, BY THE END OF THE SECOND QUARTER TO EARLY THIRD QUARTER.

AND THEN THE BALANCE TO PAY DOWN DEBT?

THE BALANCE RIGHT NOW I THINK WE ARE PRETTY MUCH TO PAY DOWN DEBT.

THANK YOU.

WE HAVE A FOLLOW-UP FROM LOUIS FORBES. PLEASE GO AHEAD.

HI, GENTLEMEN. I'M COMING BACK TO THAT PREFERRED SHARE DISCOUNT QUESTION. IF YOU WERE TO LOOK AT YOUR SEPTEMBER COUNT. AND YOUR SEPTEMBER SUPPLEMENTAL PACKAGE, YOUR SEPTEMBER Q AND YOUR Q AND EARNINGS PER SHARE CALCULATION THERE IS A DEDUCTION FOR PREFERRED SHARE DISCOUNT AMORTIZATION OF $369,000 FOR THE QUARTER. AND THAT NUMBER, I THINK, EXPLAINS GETTING TO THE 19-CENT PER SHARE FIGURE THAT YOU HAVE. AND WE DON'T SEE THAT CALCULATION DIRECTLY IN THE SUPPLEMENTARY PACKAGE. SO WE ARE LEFT TO KIND OF GUESS AS TO WHAT IT IS. BY TRYING TO GUESS, THE IMPLICATION IS THAT THE NUMBER HAS GROWN THIS QUARTER. AND PERHAPS WE ARE MISSING SOMETHING. BUT... I DON'T KNOW WHETHER YOU HAVE THAT CALCULATION DONE YET FOR PURPOSES OF YOUR Q BUT THAT'S WHAT I WAS GETTING AT.

LOUIS, FOR THE EPS CALCULATION, EVERY QUARTER WE HAVE 369,000 OUT OF THE NET INCOME TO GET TO OUR EPS NUMBER. I MEAN, WE CAN INCLUDE THAT GOING FORWARD, BUT THAT NUMBER HAS NOT CHANGED OVER THE LAST, UHM, YOU KNOW, FIVE OR SIX QUARTERS. IT'S ALWAYS BEEN A CONSIST EXTENT 369,000.

OKAY.

THERE ARE NO FURTHER QUESTIONS AT THIS TIME. PLEASE CONTINUE.

GREAT. WE WOULD LIKE TO THANK YOU ALL FOR PARTICIPATING IN THE CALL. SORRY WE RAN A LITTLE BIT LATE AND WE LOOK FORWARD TO OUR CONFERENCE CALL FOR THE SECOND QUARTER. THANK YOU AGAIN.

LADIES AND GENTLEMEN, THIS CONCLUDES TODAY'S CONFERENCE. THANK YOU FOR YOUR PARTICIPATION. YOU MAY DISCONNECT AT THIS TIME. HAVE A GOOD DAY.