Filed by Brandywine Realty Trust pursuant to
Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: Prentiss Properties Trust
Commission File No.:1-14516
This filing relates to a proposed acquisition (the “Acquisition”) by Brandywine Realty Trust
(“Brandywine”) of Prentiss Properties Trust (“Prentiss”) pursuant to the terms
of an Agreement and Plan of Merger,
dated as of October 3, 2005 (the “Merger Agreement”), by and among Brandywine and Prentiss. The Merger
Agreement is on file with the Securities and Exchange Commission (the “Commission”) as
an exhibit to the Current
Report on Form 8-K filed by Brandywine on October 3, 2005. The Merger Agreement is incorporated by reference
into this filing.
The following is a series of slides presented as additional information by Brandywine on its website on
November 3, 2005 regarding the Acquisition and related matters.
November 2005
NAREIT Presentation
Safe Harbor
In addition to historical information, this presentation contains forward-
looking statements
under the federal securities laws. Because these
statements are based on current expectations, estimates and
projections about the industry and markets in which Brandywine and
Prentiss operate, management’s beliefs and assumptions made by
management,
they involve uncertainties that could significantly impact
financial results. Forward-looking statements are not guarantees of
future performance, involve certain risks, uncertainties and assumptions
that are difficult to predict. Actual operating
results may be affected by
changes in general economic conditions; increased or unanticipated
competitive market conditions; changes in financial markets, interest
rates and foreign currency exchange rates that could adversely affect
cost of
capital, ability to meet financing needs and obligations and
results of operations; the availability of private capital; geopolitical
concerns and uncertainties and therefore, may differ materially from
what is expressed or forecasted in this presentation.
Strategic Rationale
Pragmatic targeted market expansion combining quality assets, strong
market dynamics and seasoned management
Brandywine gains a focused expansion into three dynamic markets with
experienced Prentiss management teams
Metro Washington, D.C.
Oakland, CA
Austin, TX
The Company’s relationships with Prudential and ABP create a profitable
means to evaluate opportunities in the San Diego area
Leverages strong regional office platform with third-party fees
Limited capital exposure
Dallas market serves as a capital recycling opportunity, reducing the
combined Company’s reliance on public equity for future growth
These markets combined with the stability of our Philadelphia markets
result in accelerated growth
1
Why this transaction?
Brandywine’s new markets possess higher rental rate and job
growth characteristics than its current markets
Brandywine will have significant positions and strong operating
teams in high-priority sub-markets
Dulles Toll Road - suburban Washington D.C.
Oakland - CBD
Austin – Southwest quadrant
Philadelphia platform and experienced management team
represents further opportunity
Tactical in–fill acquisitions
Monetization of development pipeline
2
What this transaction is not
This is not an attempt to create a national office platform
This is not the first of several consolidation transactions
Markets have the depth to provide significant opportunities
No additional strategic corporate acquisitions required
In-fill acquisitions and development drive future growth
This transaction is not a leveraging of the Company
All three rating agencies have affirmed
Moody’s- affirmed, stable
S&P- affirmed, stable
Fitch- affirmed, positive
Pro forma financing comprised of long-term fixed rate debt
1 Pro forma for proposed initial Dallas disposition
3
National
Office REIT
s
Capitalization
($Billions)
Square feet
(millions)
# of
markets
% sq ft in top 5
markets
% sq ft in top 3
markets
Equity Office
$27.3
117.9
26
44.2
%
29.1%
Trizec Properties
$6.0
37.3
1
0
73.4
%
47.0
%
CarrAmer
ica
$4.1
21.0
1
3
68.0
%
56.0
%
Brandywine (owned)
$5.9
29.9
6
99.3%
87.8%
Brandywine
¹
(total)
$5.9
47.2
6
95.3
%
79.7
%
Combined Company Growth Driven by
Opportunities in Place at Closing
The Growth Drivers:
Significantly higher same-store growth
$180 million incremental developmental pipeline
Staging in during 2007
Cira Centre execution
Radnor Financial Center lease up
Execution of market penetration strategy in key sub-markets with high
transaction velocity (both developments and acquisitions)
Internal capital availability
4
Market Growth Comparisons
Philadelphia is steady and solid
New markets add depth, higher growth, greater cyclicality and economic diversity
Blending of markets creates higher annual growth, core stability, and cyclical opportunity
2.60%
2.44%
1.41%
0.24%
CAGR
16.65%
15.53%
8.77%
1.44%
% Change
OAK
AUS
N-VA
PHL
Projected Population Growth*
2.56%
3.04%
3.06%
2.28%
CAGR
16.4%
19.7%
19.8%
14.5%
% Change
OAK
AUS
N-VA
PHL
Projected Rental Rate Growth*
1.39%
3.36%
2.50%
0.96%
CAGR
8.66%
21.90%
16.0%
5.90%
% Change
OAK
AUS
N-VA
PHL
Projected Office Employment
Growth*
5
* Source: REIS Data 2004-2009
Combined Company Long-term
Growth Summary
Combined Company’s Business Strategy Creates Net Operating
Income Combined Annual Growth in Excess of 11%*
2006 2007 2008
Same Store Growth
BDN + PP
Cira Centre
Radnor Financial
Incremental Investment
Same Store Growth
BDN + PP
Cira Centre
Radnor Financial
Incremental Investment
Development Contribution
Same Store Growth
BDN + PP
Increased Development
Contribution
Increased Acquisition
Contribution
6
* CAGR 2005-2008
Short Term Outlook (2006-2008)
Growth rate in excess of Brandywine stand-alone with
Cira and Radnor
Fully funded business plan
Higher blended same store NOI
The Same-Store Comparison
7
3.85%-4.00%
PP Core**
1.15%-1.30%
BDN Core*
2005-2008 CAGR
Portfolio
Existing property NOI growth
* BDN existing assets without Cira Centre and Radnor Financial Center
** PP owned (D.C., Oakland, Austin, and Dallas) and Joint Venture assets being
acquired by BDN
The Same-Store Comparison Pro Forma
for the Dallas Recycling Strategy
8
4.50%-4.65%
PP Pro Forma Core**
2005-2008 CAGR
Portfolio
1.15%-1.30%
BDN Core*
Pro forma property NOI growth
* BDN existing assets without Cira Centre and Radnor Financial Center
**PP owned (D.C., Oakland, Austin, and Dallas) and Joint Venture assets being
acquired by BDN, pro forma as if $200mm of Dallas assets are sold (and
removed from the analysis)
Total Portfolio NOI Growth Accelerates
9
6.50%-6.65%
Combined BDN-PP Portfolio***
3.70%-3.85%
BDN Entire Portfolio**
2006-2008
CAGR*
Portfolio
Includes owned assets and known development only (see
page 12). No speculative acquisitions or other
developments have been included in the calculation.
Dallas proceeds used to fund additional development.
*Portfolio property NOI growth
**BDN Core + Cira Centre + Radnor Financial Center lease-up + in process BDN
development
***BDN Entire Portfolio combined with PP Pro Forma Core + known incremental PP
development
New Markets Provide Enhanced
Investment Opportunities
New markets have significant breadth and depth
DC area is 2nd largest US office
market with over 350 million
square feet with 200 million square feet in key targeted
submarkets
Bay area is 4th largest US office
market with over 200 million
square feet with 80 million square feet in key targeted
submarkets
DC and Bay area are the 4th and
5th most populous PMSA’s in
the US
Austin is projected to have the highest employment growth
rate in the country
10
Beyond our Fully Funded Short-term
Commitments, the Growth Potential is Dramatic
11
$11.9 million
($19.2 million NOI x 62% ownership from existing BDN shareholders)
Combined Company (per annum)
$240 million @ 8.0% yield
4.5% of asset base
+ 86.7%
% Additional NOI to Existing BDN Shareholders
$6.4 million
BDN Stand Alone (per annum)
$75 million @ 8.5% yield
2.5% of asset base
2007 NOI for existing BDN shareholders
Illustrative scenario:
Development
Acquisition
$11.6 million
($18.8 million NOI x 62% ownership from existing BDN shareholders)
Combined Company
$250 million
7.5% cap rate
+ 45.3%
% Additional NOI to Existing BDN Shareholders
$8.0 million
BDN Stand Alone
$100 million
8.0% cap rate
2007 NOI for existing BDN shareholders
Illustrative scenario:
Development will have a more significant impact
on Brandywine going forward . . .
54.7%
12
Note: Data excludes Cira Center
¹ Gross assets for Brandywine as of June 30, 2005
7,987
3,001
4,986
)
000’s
(
Buildable square feet
%
4.7
%
7.3
%
4
2.
Percentage
247.7
$
179.4
$
8.3
$6
term development opportunities
-
Near
289
$5,
475
$2,
2,814
$
¹
Gross assets
Pro forma
Brandywine
Standalone
Prentiss
Standalone
Brandywine
)
illions
$m
(
Development pipeline
Near
-
term
starts
Location
Square footage
(000's)
Projected cost
($millions)
Start date
500 Office Center Dr.
Philadelphia
101
$12.3
Aug
-
0
5
Newtown Bucks County
Philadelphia
64
$
14
.0
Jan
-
06
Princeton Pike
New Jersey
75
$
17.0
Dec
-
05
Mount Laurel
New Jersey
110
$
25.0
Dec
-
05
The Park at Barton Creek
Austin
211
$44.0
Jan
-
0
6
South Lake at Dulles Corner
Dulles
265
$70.0
Jan
-
0
6
2101 Webster Expansion
Oakland
217
$
65.4
Jan
-
06
Total
1,
043
$
2
47.7
. . . and is weighted toward Metro Washington
and Oakland
13
Land held for development
67.4%
Region
Allocated
value
($mm)
% of total
Oakland, CA
23.7
37.7%
Metro Washington
18.7
29.7%
Dallas, TX
14.1
22.4%
Austin, TX
6.4
10.2%
Total
62.9
100.0%
Washington D.C. and Philadelphia will
comprise 72% of the Company . . .
Suburban
Washington, D.C.
Philadelphia Region
14
Note: Values are after initial Dallas disposition
1 Includes Suburban Virginia
1 Includes Philadelphia, PA North, PA West, and New Jersey
2 Includes Philadelphia, PA North, PA West, New Jersey and Delaware
3 Excludes Cira Center
Suburban Washington, D.C. (000’s)
4,235
³
Developable square feet
20,300
Total
2,916
Square feet managed²
,384
17
Square feet owned¹
Philadelphia Region (000’s)
Square feet owned¹
5,799
Square feet managed
¹
7,655
Total
13
,
454
Developable square feet
1,216
. . . while California will comprise
approximately 16%
15
Oakland
San Diego
San Diego Region (000’s)
976
Developable square feet
31
8
3,
Total
,091
2
Square feet managed
,739
1
Square feet owned
Oakland Region (000’s)
Square feet owned
223
Square feet managed
3,
554
Total
3,
777
Developable square feet
0
Dallas and Austin will comprise 12% of
the Company after initial dispositions
16
¹ Assumes Dallas sales of 25% to 30% of square footage in 12 to
18 months
Austin
Dallas/Fort Worth
Austin Region (000’s)
,349
1
Developable square feet
3,576
Total
496
Square feet managed
)
1,538
(
¹
Square feet to be sold
,618
4
Square feet owned
Dallas/Fort Worth Region (000’s)
Square feet owned
1,672
Square feet managed
559
Total
2,231
Developable square feet
211
Dallas capital recycling is
facilitated by market liquidity
$1.25 billion of Class A office transaction volume in the trailing six
quarters ended June 30, 2005
Average Class A cap rate of 6.58% for first half of 2005
Price per square foot for high quality office assets above $200
High profile asset sales characterized by multiple qualified bids
Continuation of plan already under consideration by Prentiss
Sale proceeds targeted to development pipeline
17
Credit ratings affirmed
18
Moody’s
“ Moody’s Investors Service has affirmed the Baa3 senior unsecured debt rating of Brandywine. . . “
“. . . the Prentiss transaction will bring increased size and geographic diversity to Brandywine. . .”
“. . . a large portion of the acquired assets are in Washington D.C., a market familiar to Brandywine, and the transaction
should boost Brandywine’s market leadership.”
S&P
“ On Oct. 3, 2005, Standard & Poor’s Ratings Services affirmed its ratings of Brandywine Realty Trust Inc.”
“ This leverage neutral transaction will materially broaden Brandywine’s operating platform and tenant base.”
“Brandywine intends to finance the $2.5 billion purchase price in a manner that will preserve appropriate credit metrics for
the rating.”
Fitch
“Fitch Ratings views Brandywine Realty Trust’s expected acquisition of approximately 77% of the assets of Prentiss Properties
Trust as a credit positive for Brandywine.”
“The acquisition of the Prentiss assets will materially add to the geographic diversification of BDN’s portfolio.”
“ Fitch also anticipates that BDN’s expected size will enhance its access to capital and potentially lower its financing costs.”
Pro forma credit statistics
Total debt / gross assets
51.1%
EBITDA/Interest expense
2.53x
EBITDA/Interest expense + preferred distributions
2.41x
Mitigating integration risk –
effective capital deployment
19
Mike Prentiss and Tom August to join Brandywine’s Board of Trustees
Provide guidance to Board on capital deployment
Tom August to enter into a two-year consulting agreement to assist in
overall integration efforts
Corporate management depth strengthened by three Prentiss
executives
Bob Wiberg – EVP of Operations
Greg Imhoff – Chief Administrative Officer
Scott Fordham – VP and Chief Accounting Officer
To ensure continuity of operations Prentiss regional managers will enter
into two-year employment agreements
All regions to be run by teams reporting to Bob Wiberg
Takeaways
Regional focus -- Brandywine becomes a regionally focused REIT with
several attractive capital deployment options
Strong platform -- platform can effectively respond to demand drivers in
new markets
Increased growth -- Projected EBITDA growth rates from new markets
exceed expected growth rates from the Philadelphia
region
Market outperformance -- Brandywine is well positioned to outperform in
the Philadelphia Region
Experienced management -- Combined management team ranks best-
in-class and has the depth and scope to replicate Brandywine’s
market
concentration strategy
Balance sheet flexibility -- Expanded balance sheet allows Brandywine
the opportunity to increase development pipeline
and strategically
pursue property acquisitions
20
FORWARD LOOKING STATEMENTS: Certain statements in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, achievements or transactions of Brandywine, Prentiss Properties and their affiliates or industry results or the benefits of the proposed merger to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors relate to, among others, difficulties encountered in integrating the companies, approval of the transaction by the shareholders of the companies, the satisfaction of closing conditions to the transaction, the companies’ ability to lease vacant space and to renew or relet space under expiring leases at expected levels, the potential loss of major tenants, interest rate levels, the availability and terms of debt and equity financing, competition with other real estate companies for tenants and acquisitions, risks of real estate acquisitions, dispositions and developments, including cost overruns and construction delays, unanticipated operating costs and the effects of general and local economic and real estate conditions. Additional information or factors which could impact the companies and the forward-looking statements contained herein are included in each company’s filings with the Securities and Exchange Commission. The companies assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
Additional Information about the Merger and Where to Find It
This presentation does not constitute an offer of any securities for sale. In connection with the proposed transaction,
Brandywine and Prentiss Properties filed a joint
proxy statement/prospectus as part of a registration statement on Form S-
4 and other documents regarding the proposed merger with the Securities and Exchange Commission. Investors and
security holders are urged to read the join proxy statement/prospectus
because it will contain important information
about Brandywine and Prentiss Properties and the proposed merger. Investors and security holders may obtain a free
copy of the definitive proxy statement/prospectus and other documents filed by
Brandywine and Prentiss Properties
with the SEC at the SEC’s website at www.sec.gov. The definitive joint proxy statement/prospectus and other relevant
documents may also be obtained free of cost by directing a request to Brandywine
Realty Trust, 401 Plymouth Road,
Suite 500, Plymouth Meeting, PA 19462, Attention Investor Relations, (telephone 610-325-5600) or Prentiss Properties Trust,
3890 W. Northwest Highway, Suite 400, Dallas, Texas 75220, Attention: Investor Relations (telephone
214-654-0886).
Investors and security holders are urged to read the proxy statement, prospectus and other relevant material when they
become available before making any voting or investment decisions with respect to the merger.
Brandywine and Prentiss Properties and their respective trustees and executive officers may be deemed to be
participants in the solicitation of proxies from the shareholders of Brandywine and
Prentiss Properties in connection with
the merger. Information about Brandywine and its trustees and executive officers, and their ownership of Brandywine
securities, is set forth in the proxy statement for Brandywine’s 2005 Annual Meeting
of Shareholders, which was filed with
the SEC on April 1, 2005. Information about Prentiss Properties and its trustees and executive officers, and their
ownership of Prentiss Properties securities, is set forth in the proxy statement for
the 2005 Annual Meeting of Shareholders
of Prentiss Properties, which was filed with the SEC on April 5, 2005. Additional information regarding the interests of those
persons may be obtained by reading the proxy statement/prospectus when it becomes
available.
This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities
in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus
meeting the requirements of Section 10 of the Securities Act of 1933, as
amended.