Good morning. My name is Cathy, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Brandywine Realty Trust Third Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the conference over to Mr. Jerry Sweeney, President and CEO. Please go ahead, sir.

Cathy, thank you very much. Good morning, everyone, and thank you for participating in our third quarter 2016 earnings call. On today’s call with me today are George Johnstone, our Executive Vice President of Operations; Tom Wirth, our Executive Vice President and Chief Financial Officer; and Dan Palazzo, our Vice President and Chief Accounting Officer. Prior to beginning, certain information discussed during our call may constitute forward-looking statements within the meaning of the Federal Securities law. And although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurances that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release, as well as our most recent annual and quarterly reports that we file with the SEC. Now moving to our presentation, as we normally do, we’ll start with an overview of our 2016 business plan. We have also introduced, as is our tradition, 2017 guidance, and we’ll provide color on some of the key assumptions driving those forecast. Looking at 2016, our business plan is substantially completed with good visibility on year-end results. As a consequence, we have either increased or tightened most of our 2016 business plan ranges. Our focus year-to-date remained on operational performance and our investment plan. And that focus has paid off as we believe we have posted strong results and advanced all of our investment and balance sheet objectives. 2016 is a seminal year for us, and we have substantially completed our portfolio repositioning plan. We have already exceeded our $850 million disposition target with year-to-date sales totalling $860 million. So we are increasing our 2016 disposition goal to $900 million. Our sales efforts have created a stronger growth profile, reduced recurring capital spend, and accomplished our intermediate…

Thank you, Jerry. We’re extremely pleased with our third quarter results and the substantial completion of our 2016 business plan. Our 2016 accomplishments create momentum heading into 2017. Leasing activity remains robust in all of our markets. The pipeline excluding development properties, stands at 1.7 million square feet with 337,000 square feet and lease negotiations. Space inspections during the quarter totaled 882,000 square feet, which represents 50% of available square footage. Turning to our three core markets, our 98% leased CBD Philadelphia portfolio outpaces the market by 820 basis points. Leasing spreads remain robust and forward roll over exposure has been reduced to 2.7% in 2017 and 8.7% in 2018. The overall outlook for the Greater Philadelphia region remains encouraging, positive absorption occurred for the sixth consecutive quarter and absorption for the year totals to 464,000 square feet. Market rents continue to escalate as tenants shift towards newer amenity rich product. The Crescent Markets of Pennsylvania also continue to perform well where we’re outpacing market vacancy by 770 basis points. In Radnor, we have a few larger blocks of space coming back in the second and third quarter of next year. These are the first larger blocks that have been available on Radnor for some time now and activity levels today by both existing tenants and new tenants has been encouraging. Our vacancy in King of Prussia is aggregated in two buildings, one of those a 93,000 square feet five story midrise will be placed into redevelopment during the fourth quarter of 2016. Turning to Metro DC, the region has added 95,000 jobs during the year and regional unemployment is 4% which is 100 basis points lower than the national rate. During the quarter the state and local government sector led all categories of employment growth followed by the professional…

Thank you, George. Our third quarter net income totaled $6 million or $0.3 per diluted share and our FFO totaled 58.3 million or $0.33 per diluted share. Some observations regarding third quarter. Same store results for the third quarter were 1.7% GAAP and 3.2% cash, both excluding net termination fees and other income. We’ve now had 22 consecutive positive quarters of GAAP and 18 for that cash metric. G&A expense decreased from 6.1 to 5.5, in our third quarter G&A was below our forecast, primarily due to timing of professional fees, some of which will be incurred in the third quarter. FFO contribution from our unconsolidated joint ventures totaled $8.6 million, below our third quarter projection due to higher than anticipated operating cost at several of the portfolios and increase interest expense due to the refinancing of the mortgage at Evo. Interest expense totaled 20.8 million, a 1 million sequential increase from the second quarter, primarily due to the reduction in capitalized interest as FMC becomes operational. Compared to the third quarter of 2015, our quarterly cash interest expense excluding capitalized interest has increased -- has decrease 25%, due to lower debt levels and lower interest rates from our financings. Our third quarter CAD totaled 37.5 million representing a 75% payout ratio. During the quarter we incurred 9.9 million of revenues maintaining capital and 4.3 million of revenue creating capital. Looking to the fourth quarter, property level operating income for the fourth quarter will be approximately 75 million to 76 million, a sequential increase in the third quarter is a roughly a million dollars coming primarily from increased occupancy at FMC, partially offset by the recent and increasing disposition activity. G&A for the fourth quarter will be approximately 6.3 million, and the full year number will be 27 million. Other…

Tom, thank you. George, thank you as well. Let’s wrap-up our prepared comments. Sorry we ran long but we’re going through '16, previewing '17. I think as we assess it in our performance in '16 and looking to our '17 plan the trend lines are strong reflecting, as George touched on the better asset mix portfolio reaching stabilization. We think it's our good discipline and control on capital spend and some pretty successful leasing strategies. Our sales transaction has really repositioned the portfolio, raised plenty of liquidity reduced our debt and put us in a position where we can actually start to grow cash flow at a fairly good pace. So with that we’ll be delighted to open the floor for questions as we always do we ask that in the interest of time you limit yourself to one question and a follow-up. Thank you.

[Operator Instructions] your first question comes from the line of John Guinee with Stifel.

Very nice quarter and guidance, guys. Let me drill down and ask a couple questions on the internal growth. I think what I heard here was $35 million of revenue maintaining CapEx and $26 million of revenue creating CapEx. I'm assuming that's all associated with leasing. So should I take that $2.25 per square foot, per year, of re-tenanting costs and add another $1.72 to it of revenue creating CapEx?

John first of your comment on the two numbers they are correct. That’s what we gave for the range. I would say that’s close to accurate. I think in our revenue creating bucket we do some additional work that wouldn’t really be what I would call dollar for dollar against leasing, it may incur base building work, it may include some repositioning on properties that may not have a direct effect to our lease.

Perfect, okay. And then I think what I also heard is you are finishing the year -- and with $200 million of cash on hand, and then finishing 2017 with an $80 million balance on your line. So, effectively, that's about a $280 million spend. Is that the right way to look at?

It is. I think as looking at again we are still working on our -- how we will look at the refinancing. $150 of that is going to be related to the financing. So we are going to be paying off in fact 205 of it, we’re going to benefit paying off the preferred stock of $100 million paying off the bonds of $300 million, so that’s a total of $400 million and the only refinancing assumption we have made right now is a $150 million term loan to take care of that. So in effect that’s going to be a large use to the cash. In addition we have $130 million of development. So when you look at that you can then add the development cost of about $130 million, which I outlined the majority of it being FMC 933, 1900 market and a development start.

Okay. And then the last question would be, if you look at midpoint to midpoint, $1.29 to $1.40 for 2016 guidance to 2017 guidance, basically a very healthy $0.11. How much of that $0.11 is coming from the preferred payoff, preferred share payoff, plus the lower cost of capital on your bonds? And how much is coming from operations and/or development?

The effect of paying off the bonds in April will be about $0.02. I didn’t do a specific calculation on the debt, except that our interest expense is going down about 3.5 million sequentially from ’17 from ’16. So that would probably be another $0.02 on interest expense.

And then a sizable portion from paying off the preferreds, I'm assuming.

The preferreds are about $2 million.

Got you, okay. And then the last question --.

Sorry $0.02

$0.02, okay. Then the last question for -- I guess probably for Jerry. What we see happening in the investment sale market is an amazing spread between incredibly or historically low cap rates for core and super core assets, but a very, very high cap rate for commodity assets in commodity markets. Can you expand on what you guys are seeing out there?

Sure John happy to, I think from our prospective, we’re really happy with how we been able to do there in the course of the year so far. In meeting the goals and certainly being able to increase the target up to 900 million. I think our view point in the investment market right now for commodity product is somewhat restricted to a small sized transaction, I mean essential we have in the market today, near average deal sizes probably in the $20 million. So we still have a pretty good list of bidders for that. I think as you noted, there certainly a lot of commodity product on the market. We are saying that for all intents and proposes the buyer pool is static, a lot of the traditional large consumers of commodity product have their plates kind of full. So we’re seeing a number of new smaller players kind of enter the game, they typically need to kind of tie up a deal and then get there equity and debt financing pulled together, which we’re certainly saying as protracting kind of the closing cycle of some of these deals. So I think as we access where we are, we think our small deal size is a good advantage. All that properties that we’re selling are, at least based upon on what we’re saying from the targeted buyers is immediately financeable. We generally maintain our properties pretty well so there tends to be a lowering level of base building improvements that need to made, if you’re looking from an underwriting stand point and bank financing is pretty available. But we don’t think there is any question that with the flood of commodity product on the market that you’re going to see, deals take longer to get done. We frankly haven’t seen any pricing backing up on our transactions. But again we’re dealing in some very specific markets and our deal size tends to be below with a lot of other companies are out there marketing.

And the next question comes from the line of Craig Mailman with KeyBanc Capital Markets.

Just wanted to drill in a little bit here in same-store. You guys are basically going to have a 500-plus basis point upturn in 4Q. Can you just run through -- I know, George, you said burn-off of free rent and maybe something about IBM. What the free rent component of that would be of that uplift versus just operations?

I mean the free rent component we have roughly $5.8 million of free rent in Q3 and that drops down to about $3.8 million in Q4. And a lot of that Craig is coming off of leases that were done 4Q ’15 and earlier in ’16. And then the IBM deal down and Broadmoor, if you remember, we talked about this maybe a call or two ago. They had two tranches of expirations and basically we moved the rents there from an all-in 17.50 to an all-in 22.57, so the 29% increase in the cash rent. So, the square footage in Broadmoor and the continued burn off of free rent. And then again we’re still getting between 2.5% and 2.75% escalators in our leases. So we’re seeing natural growth in the escalations as the leases go from year-to-year.

Okay. But as we look out to ’17, that 600 basis point delta between GAAP and cash, the bulk of that is free rent burning off, right? Could you give us a sense of maybe where straight line could end 2017 to get a magnitude of that impact?

I mean, the total amount of free rent in ’16 was north of $20 million, and it drops to about $8.5 million in ’17.

All right, that's helpful. And then on the rent spreads, I know you guys laid out IBM is the bulk of that. Could you just though give us a sense of what you're seeing in market rents in your different markets? I know you touched on the CBD Philly a little bit, but maybe run through some of the others.

I mean, I think we’re seeing good rent levels in the Pennsylvania suburb, especially in the Crescent Markets. Rents are near all-time highs in Radnor and that bodes well with the rollover activity that we have in Radnor in ’17 with a couple of the rollovers that we have with HTH moving from Radnor for the built to suit out in King of Prussia, and then with a deal that we had with Hartford in Radnor where they’ll be moving out the King of Prussia. So that’s really what’s kind of helping us with that 3 to 5 range cash in ’15 and ’17 range gap that I alluded to during my commentary in the Pennsylvania suburbs.

Okay. And then Jerry, FMC, you guys are still -- have the 8% yield that you are targeting. Could you just remind us where the remaining vacancy is in the stack? And is there anything with the leasing taking a little bit longer that could potentially impact that? Or do you guys lock in the higher rent portion of the buildings, so you guys feel pretty good?

We feel very good. The space that’s really available is mid-bank and the prospects list is very good, with FMC the project is nearing completion. So the tower crane and the hoist will be coming down in the next 30 days or so as I touched on the office tenants have successfully moved in, the residential models and the amenities floor are ready to open up very shortly. We just completed the porte-cochere entrance along with the elevators up to Cira Green, which has been announced to some great fan fair. We announced a little bit ago that we’re bring a Michelin rated restaurant toward the Philadelphia to occupy the restaurants based at FMC and the market momentum is building I mean look certainly from our perspective completing the office lease up is in major to do and we are on it. We expect to make really good progress at a near term pipeline of the deals, some of them reported. But we are talking to a number of single floor users whose -- where those discussions are advancing quite nicely. We broke down one floor, Craig to multi-tenant, we fully leased that up. We’re breaking another floor down now. So I think we feel pretty good about the response the project's had in the market. Certainly the profile of projects has continued to improve. There was just a report that came out in the region that identified FMC tower as the number one project in the region that’s transforming communities and that was by biz now. So I think things like that start to really build momentum. And then you juxtapose that some of George’s commentary about the strength of the CBD and University City Market, I think we feel very good about where we are. We feel a lot better if everything was signed and locked away certainly, but I think when we assess the pipeline, review the profitability of execution I think we feel pretty good about where we are right now.

That's helpful. And then just one last quick one on development. What's the magnitude you guys are assuming in guidance for the start and timing? And is that -- are you going to only do a build-to-suit there, or do you have a decent pre-lease, potentially, on a partially specced build away?

Yes I think as Tom touched on. We put it into to our business plan for '17 is about $50 million hold for expenditures on developments starts. I say that with the number one priority we have in our -- really remains on our existing portfolio completing our existing projects with FMC is clearly a number one priority completing 933 First Avenue. We have the Broadmoor and another King of Prussia redevelopment underway. So that’s our core focus and we are certainly very mindful of where we maybe in a cycle. And I think as we assess some of these opportunities our hope is to really effectively balance the value creation aspect of those with our balance sheet targets and the overall risk profile in our portfolio. We are having a lot of discussions on some of our other development pipeline deals with existing tenants who are looking for expansion, new tenants that we’re porting and frankly at this point they range from significant pre-leases to build-to-suites like we are doing in the King of Prussia for a tenant that had to double their square footage.

Your next question comes from the line Jamie Feldman with Bank of America.

This is Scott Freitag here with Jamie. Good morning. Can you please just discuss or provide some more color on the supply/demand fundamentals in Austin and your outlook for that market headed into 2017?

Sure look I mean I think George walked though some very good statistics on the where the Austin market is right now relative to absorption activity, leasing activity what we are seeing happen with rental rates. We still view that as a very good strong performing market with a lot of blue skies. We certainly are always on the lookout for some storm clouds. So I think as we are looking at the portfolio, we’ve had a number of moves within the portfolio and frankly it made great progress in the last quarter or so in back filling where tenants have needed to move into larger spaces, we’ve been back filling their smallest spaces. So from a blocking and tackling stand point, we’re continuing to see evidence that the market throughput remains very, very strong. There are a number of projects in the queue for development. We’ll see how they fair, and whether there is any kind of pull back on that. But certainly the demand driver seem pretty consistent with what we saw last quarter, we’re continuing to see uptick in rents. To give you a good example our 906 Broadmoor redevelopment project, we’re going through some demolish there, some repositioning efforts and the pipeline of activity is really very strong at very good rental rates. So certainly as we look at the market place in Austin from our business plan stand point, our major opportunity we think in that market today is to simply accommodate the growth requirements of our existing tenant base. And as we asses that, making sure that there is a sufficient pipeline of transactions behind that, that can effectively backfill that space. But we certainly keep an eye on what’s happening in market place, the good news is the few starts that have commenced have achieved a pretty high level of preleasing. Leasing concessions, rental rates again see more steady states than any kind of early warning sign.

Okay, great. And then just following up on a previous question, when we think about the demand that you are seeing for potential build-to-suit projects and the land bank that you have, are there specific markets that you would feel more comfortable starting new development?

Well it’s a good question; I think we’re seeing good activity across all of our markets. I say the demand that we’re seeing is probably more heightened in Austin, with primarily getting driven by some of our existing tenant base. But even within the Pennsylvania suburbs in Philae CBD, we continue to have I think some very fruitful discussions with tenants who are looking again to either consolidate space, expand in an outright standpoint looking to reposition the physical space that drives there company. But I think, as we talked on previous call, I think what we’re excited about particularly with the repositioning for intents and purposes behind us is the inventory class, we have within the existing portfolio is much higher today than it was twelve months ago. And the development pipeline we pulled together between our core markets certainly puts us at the forefront of a lot of a customer discussions on how they want to reconfigure their office space. And with the labor market being tighter, even with the economic outlook being somewhat uncertain, a lot of our customers really are focused on creating a right physical platform to effectively grow their business. And we’re seeing that high quality office space, higher ceiling, lead certification, access the mass transportation, amenity programs are all key considerations as they start to think about their Company’s physical platform for the next 10 to 15 years.

Your next question comes from the line of Emmanuel Korchman with Citi.

If we just look at all of the product you have in the market right now, if you were to sell all of it, how big are those volumes in total?

Well, I think right now we have just shy of $75 million that are under a letter of intent. So, we raised our guidance, the additional $50 million, we assumed that a piece of those would get done by the end of the year. As we look at 2017 and the $100 million, the target we’ve laid out, they’re at the mid-year convention. We will be putting some more properties in the market towards the end of the year for hopefully some effective marketing in the first and hopefully closing in the second quarter of next year.

Right. And then if we think about your disposition program in aggregate, how much do you think you have moved down the cap rate that we should be thinking about your portfolio being valued at? So if we look at -- pick a date, so January 1, ’15 and we look at your portfolio today, how much should we be thinking about that cap rate moving?

Look, I think when we take a look at what we’ve been able to do, I mean certainly we think that the cap rate that's more assignable to a Brandywine today is in the low to mid 6s across the board. I mean certainly we’ve seen in some of the sales transactions taking place in some of our core markets, even with some of the pending transactions in the City of Philadelphia you’re seeing cap rates in the very low 6s for the quality space. So we think that’s where we are and that’s where we want to be positioned. Certainly, that’s always a tough number to locking concrete because it could be high or low based upon what macro conditions are. But we really take a look at the portfolio, Manny year-over-year, we think we’ve clearly bought the cap rates down well over 100 basis points with the existing portfolio we have.

Your next question comes from the line of Michael Lewis with SunTrust.

I'm going to ask Manny's disposition question a little differently. You've got, it looks like, 21 assets that are not in Philly, DC, or Austin. I'm wondering -- over the next three years from now, four years from now, five years, how many of those do you think you still own.

Well, what we’ve really done there in our other category is, a big piece of that is the two buildings we have in California. We certainly anticipate that ’17 will be the year that we complete that asset. We have a number of other properties, kind of when we called 9 core Philadelphia and DC markets. So, as we look at our disposition plan honestly Michael over the next couple of years, I think that other category will be a major source of those sales. We saw the couple of remaining properties in New Jersey that we targeted for sale. We sold the vast majorities over the last couple of years, but we still have a couple of complexes that have gone through some leasing right now that we hope to put to market. We have two assets remaining in in Wilmington, Delaware that we will continue to market as we move into '17 and '18. So we do look at that as primarily the source of asset sales over the next several years. And that being said it doesn’t preclude the possible that we might reach into some of our core assets, if we think pricing metrics are there and sell those analogous to what we did with the main post office project here in Philadelphia we talked and we optimized the value of that piece for real estate, thought that the market for trophy properties which really very strong so we were able to sell that for a very effective cap rate and a large profit. We will be continuing to evaluate that other category, but then certainly monitoring core assets that we where we reach the optimal value point and if we think that buying demand is there, that may be a very effective way to continue growing NAV of the Company.

Is it fair to say that if the investment market stays strong, you might go perhaps well over that $100 million, kind of like we saw you increase the disposition guidance from the beginning of 2016?

It certainly possible, look I think we have made very clear that we see the demand drivers for the office business having changed and continuing the change. So anything that doesn’t -- any activity that really doesn’t fit our criteria's of having multiple modes of accessibility, highest quality constructing, the ability to accommodate the requirement for tenant flexibility. I think we’ll evaluate all those things. So certainly as we go through our asset base that’s something we always spend a lot of time thinking about. So if the investment market remains very strong, I think your observation is on target. We would be biased to accelerating rather than slowing down the pace of dispositions.

Thanks. And then quickly on FMC Tower, you gave a lot of good detail there. Have you said how much contribution -- NOI contribution you expect to get from FMC in your 2017 guidance, and how the timing of that becoming cash flow filters through the year?

We didn’t say a number, we’re anticipating the number in the high teens to $20 million range in terms of GAAP NOI coming off of FMC.

[Operator Instructions] your next question comes from the line of Barry Oxford with DA Davidson.

Jerry, when I look at your numbers and I see the strong growth in the cash, and I guess most of that probably be driven by burn-off of free rent, how do you guys look at the dividend going forward?

Well I think Barry that’s certainly a Board decision and the Board looks at that every quarter. And actually as we talked a number of quarters ago, in advance of us announcing our dividend increase in May. What the Board is really looking at is, do we have multiple year operating visibility on being able to grow cash flow. So if you look at it thematically we’re projecting in 2017 that we’ll be circling around in 95% occupancy level. As George touched on, when we take a look at our '17, '18 and further out rollover we’re down to about 10% rollover in the portfolio. So we have a lot of portfolio stability. We have I think a multiple year track record now of really controlling capital costs, as a percentage of rent and as a capital per square foot per leased year. So the operating program looks very solid and that’s certainly a key aspect that we review in detail with our Board every quarter. Add on to that, that we’ve done a very good job of repositioning the balance sheet in terms of reducing overall leverage levels, improving our EBITDA margins, lengthening our debt maturity curves and controlling our exposure to floating rates, whichever way they go up or down. We have a lot of certainty build into our balance sheet. So as we look at that aspect as well, we really have ‘17 we have bonds coming due, ’18 we’ve bonds coming due and the reality is once we effectively address those, we’re pretty free and clear on debt maturities until 2022 or so. So I think the ingredients that projected very stable, growing, high quality portfolio are all there, which is why we’re very happy with how the numbers are coming in our 2017 business plan. So with all that things said, I think the Board will take a look at, the significant growth we’re projecting in cash flow. How we’ve mitigated for rollover exposure, how we’ve eliminated inventory risk in some of our lower quality assets and certainly take a look at whether that’s something that in terms of increasing the dividend is something that’s on the radar screen either in ’17 or in ’18.

Great, great and then getting back to Austin. Jerry, are you seeing it mostly being driven by tech tenants, or not necessarily, you are seeing a good diversity of tenant types demanding space?

While I think it’s still primarily tech for sure. Austin does have an element of diversity to it that we really do like and we see certainly a lot of companies that like the proximately of the University of Texas. How they tie into the academic research healthcare charters [ph], there is certainly a lot of activity percolating on those fronts. It has a benefit of a government/legal financing sector. So we still do like the diversity, with that we do see within our prospects list in Austin. It does however remain more tech focused, so overall always monitoring that level of activity versus some of the other tact corridors around the country.

Your next question comes from the line of Jed Reagan with Green Street Advisors.

Can you talk about the occupancy and cap rate profile of the assets you are looking to sell in 2017?

In 2017 Jed, we haven’t identified a specific pool of -- specific assets. I think that probably the larger pool that we’ve identified really is the sale in California. Where we have the properties currently about a 100% leased. We got a rollover there with our banking tenants, but they’re also going to sign an amendment to stay in a portion of the space and marketing activities continue. So I think that will be a nice, short term stable but value add opportunity. A number of other properties in New Jersey are kind of in the 80% to 92% leased range, and in Delaware we’re basically again 85% to 100% leased. So, a pretty decent mix, probably not too far off what we’re able to do in 2016 where the average occupancy of what we sold as I mentioned earlier was about 95%.

Okay, thanks. That's helpful. And what's the plan for the King of Prussia redevelopment that you are initiating this quarter? And was that anticipated in the original 2016 business plan?

You mean the built-to-suit that we’re doing in King of Prussia? We did incorporate that and expect that to be part of our ’17 business plan, it's about 93,000 square foot building. We’ve been moving tenants out of that building into some of our other properties. So were in the planning design. We need a few local approvals. So we would expect to commence that redevelopment program sometime in the first quarter of next year. Redoing the building systems, glass line lobbies, reconfiguring the parking lot. It's really -- it's an older building but in a location that’s gotten better within King of Prussia, so we have high hopes we’ll be able to get some leasing activity out of that project very late in 2017.

And does that move affect your 2016 numbers at all, or that's more of -- that falls to 2017?

No, that would -- I mean we’ve already contemplated Jed, storage in our ’16 numbers. If you look at page six and seven supplemental where we kind of do the occupancy roll forwards. Last quarter we had introduced that in the taken out of service line. So, the 93,000 square foot building that will be literally empty in the fourth quarter when it comes out.

Got it. Okay, thanks. And then on the potential development start for next year, is there a specific project you have in mind? And what could be the overall cost of that start?

Well, I think there are a couple that could be potentially that candidate. I think to make sure that we reflected that possibility into our financial plan as Tom touched on we’ve built a reserve amount so to speak in our source and use, Jed of $50 million for 2017.

Okay. But I take it that the ultimate cost could be something north of that --?

I hope it’d be something north of that or below that depending upon which transaction -- what series of transactions comes together.

Okay, great. And last one for me. It looks like your leasing volume slowed a little bit after a busy first half of the year, and your concessions picked up a little bit last quarter. Should we look at that as a reflection of any kind of broader leasing slowdown you are seeing? Or more a one-off or just a function of maybe what your expirations were last quarter?

I think it really has to do with the fact that occupancy in the portfolio is increasing, so the space we have to market is going down. We’ve been out in front of these forward rollovers, so you kind of get a lot of larger renewals that can kind of sometimes skew a quarter. But I think in assessing day-to-day prospects through touring vacant space, so I think we’re seeing almost a constant run rate where we’re kind of getting close to 50% coverage ratio on our available space with day-to-day tours. I think also just to add on to that. The third quarter we did about 700,000 square feet leasing this year, Jed by primary reference in third quarter of '15 we did about 640,000. So when we look at year-over-year Q3-to-Q3we felt pretty good.

Okay. So, George, you said the activity generally feels pretty steady?

Yes I think we typically always have little bit of summer slowdown, so I think if we went back in showed our third quarter numbers year-over-year it probably is arguably the lowest -- sometimes the lowest quarter before.

Your next question comes from the line of Rich Anderson with Mizuho Securities.

Great quarter. So, George, first to you. Obviously for 2017, your cash releasing spread guidance is above your GAAP because of Broadmoor. Is there any reason, though, to take that out of the equation, why that -- the difference between GAAP and cash should start to -- the spread should start to narrow versus what it has been in the past? And I was wondering if you can kind of -- -- not for 2018 guidance already, but if you could talk about how that might be different in the future as you spend less capital, and so on.

Yes, that Broadmoor deal not only is skewing the cash, but it is adversely skewing the GAAP. The GAAP on that one was minus 5%. So without that deal our GAAP mark-to-market really when you look at Philadelphia, Pennsylvania and met DC we have been that call of 10% to 12% range on a GAAP basis. So it really is one deal that’s kind of throwing off the bunch, but -- and that was part of the reason why I tried to incorporate the regional spreads in my commentary knowing that one deal giving the fact over 625,000 square feet, it had such a dramatic impact.

Right. But it has been -- the spread between GAAP and cash on that measure has been, call it, 700, 800, 900 basis point differential, the GAAP being greater. Is that where we will revert back to 2018, after this Broadmoor issue runs through the system?

Yes I think you will most likely continue to see that and I think -- and again part of that is going to be until we get our met DC region back to kind of fully stabilized occupancy level where cash rents are continuing to roll down. So I think until we churn through some of the 5 years to 7 years to 10 years deals that we have done and they start to get back to normalized market number. But I think that typical spread in '18 will kind of get back to what we saw in '15 and prior.

Your next question comes from the line of Emmanuel Korchman with Citi.

Tom, just a quick follow-up. The building that you've got coming out into the redevelopment pool, how much does that impact your same-store NOI outlook?

I don’t think it does at all.

No.

I mean --.

Why wouldn't it? I'm assuming it's in the same-store pool now. So by taking it out, won't that improve your same-store outlook?

Are you thinking of something we are taking out of --.

You've got the vacant building in Radnor, correct?

[Multiple speakers] Yes. It’s King of Prussia.

King of Prussia, excuse me. So it's in the pool now or it was in pool? [Multiple speakers].

It is in the pool now. It will come out in the fourth quarter as we empty it. Manny, I don’t think it effects it much because it’s down to -- it’s a very low occupancy right now.

Yes right now it’s got like a 25% occupancy level, so it’s really not a same store contributor.

Right, it’s already not contributing much and we’ve plan on taking it down to zero and that’s still a reasons it’s not in redevelopment, because there is active leases in it. But the margin on has been dwindling over the last years as we’ve proactively emptied the building. So the net effect on same store for us would be small, considering it’s about a 100,000 square foot building.

There are no questions at this time, I will now turn the call back over to Jerry Sweeney for closing remarks.

Great, thank you all for your patients, I know our comments ran long, but we had cover’16 and ’17. So we appreciate all the questions and certainly look forward to discussing and update of our business plan in our late January call. Thank you very much.

Thank you, this concludes today’s conference call. You may now disconnect.