Ladies and gentlemen, thank you for standing by, and welcome to the Brandywine Realty Trust first quarter 2021 earnings call. At this time, all participant lines are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker today, Jerry Sweeney, President and CEO. Please go ahead.
Sarah, thank you very much. Good morning, everyone, and thank you for participating in our first quarter 2021 earnings call. As per our normal process, on today's call with me are George Johnstone, our Executive Vice President of Operations, Dan Palazzo, our Vice President and Chief Accounting Officer, Tom Wirth, our Executive Vice President and Chief Financial Officer. Prior to beginning, certain information discussed during our call may constitute forward-looking statements within the meaning of the federal securities law. Although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance 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. Return to some semblance of normalcy.
The pandemic continues to disrupt, but with the vaccine deployment being accelerated, we are about the economy opening up, and we're hearing that directly from many of our 1,200 tenants. Our portfolio right now still only remains about 15%-20% occupied. The predominance of tenants that returned thus far are the small to medium-sized employers. What's interesting, though, is many restrictions imposed by governmental agencies are being gradually loosened by state and local governments. That happened just recently here in Pennsylvania and Philadelphia, and we believe those changes will definitely accelerate the return to the workplace. During our prepared comments today, we'll review our first quarter results, discuss progress on our 2021 business plan, and update you on our recent transaction and development activity. Tom will, after that, provide a detailed financial review, and subsequent to that, Dan, George, Tom, and I are available for any questions.
First thing is a general update on COVID-19's impact. Consistent with all applicable guidelines, our buildings have remained in a doors open, lights on condition. Each of our buildings has a customized return to workplace presentation that's been distributed to our tenants, and our property teams are in active discussions with many tenants on coordinating a safe return. These discussions have enabled us to understand the tenants' concerns and aid them in their transition plans. We have heard from about a third of our tenants directly in the last several weeks, and the trend lines from those are indicating three basic milestone dates: July 1st, Labor Day, and into the fourth quarter of 2021. We've heard from about almost 400 tenants, and clearly the small and the mid-size tenants look to be returning to the workplace first before the larger tenants.
As we look at our business plan, certainly from a revenue standpoint, our key priority has been to focus on tenants whose spaces roll in the next two years, and those efforts have been very successful, and they significantly reduced our forward rollover exposure to an average of only 6% for the period of 2021 through 2023, or 8% annual rollover for the years 2022 to 2024. We do remain focused on revenue and earnings growth, and key near term earnings drivers for us are leasing up our key vacancies that we anticipate will be absorbed in the next 24 months, and we do anticipate that those leases will generate around a 10% cash and GAAP mark-to-market and could generate between $0.07-$0.10 per share in additional earnings. We do have 405 Colorado and 3000 Market stabilizing next year.
The continued performance of our early renewal program, and to add to the earlier rollover stats, when we look at our company from 2021 through 2026, we are, through the efforts of our leasing teams on the early renewals, we're below 10% annual rollover in each year through 2026. Looking at first quarter results, we did post FFO in line with consensus. We've made very good progress on many of our 2021 business plan objectives. We achieved a 90% target on our speculative revenue range midpoint. As we anticipate in our business plan, we did have 165,000 sq ft of negative absorption during the quarter. However, we've already leased 72% of that at an average cash mark-to-market of over 19%. Rent collections continue to be among the best in our sector, and we have collected over 99% of first quarter billings.
First quarter capital costs also remain well below our historical averages and within our 2021 business plan range as we continue to have good success in generating short-term extensions that require minimal capital outlay. Certainly George is available to answer any detailed questions on that front. Tenant retention came in at 52%, and our portfolio lease percentage remained within our business plan range. First quarter cash mark to market was positive 5%, and our GAAP mark to market was a positive 8.3%. Both of those results are below our full year ranges. However, based on leases already executed with higher mark to markets, we will be within our business plan ranges for 2021. We also expect all of our regions will post positive mark to market results on both a cash and a GAAP basis.
Looking at same store, our first quarter GAAP same store was -0.9% , below our 0%-2% range, and our cash same store was -1.4% below our range of 3%-5%. Similar to the mark to market, tenants taking occupancy later this year will enable us to achieve our 2021 business plan targets. It's also important to note that with the exception of Met D.C., all of our regions and operations are expected to post positive same store results. Met D.C. will remain negative while 1676 International continues through its lease-up phase. During the quarter, we did execute a 75,000 sq ft lease with a large professional service firm, for a 10-year term with 2.5% bumps, and that represents about 30% of our current vacancy.
In addition to that, and maybe more importantly, our overall leasing and tour activity is accelerating and our pipeline remains about 600,000 square feet. Tom will give us more detail on the balance sheet, but we are still forecasting a debt to EBITDA multiple in the range of 6.3x to 6.5 x, depending upon the timing of some future development starts for the balance of the year. We have to keep in mind that we are in the beginning phases of a transition in the return to work journey, and we know everyone's looking for data points. We believe it will take three quarters or so to fully play out. We know everyone is looking for recovery data points, and we have several encouraging signs we'd like to share.
Recently published reports indicate that 80% of tenants want to tour spaces virtually before committing to an in-person tour, at least at this point in the cycle. We experience the same trend within our portfolio. During the quarter, we had a total of 1,500 virtual tours inspecting over 725,000 sq ft of space. We think that was a contributing factor that led to a 40% increase in physical tours over the fourth quarter of last year. Our overall pipeline stands at 1.2 million sq ft with approximately 165,000 square feet in advanced stages of lease negotiations, and the overall pipeline did increase by over 400,000 square feet during the quarter. We are clearly seeing from the pipeline additions that the return to work movement will accelerate and the flight to quality, higher quality office buildings, is becoming increasingly clear.
From a liquidity analysis and dividend coverage standpoint, we have excellent liquidity, and as Tom Wirth will touch on, anticipate having just shy of a $470 million line of credit availability by the end of the year. We have no unsecured bond maturities until 2023 and have fully encumbered our wholly owned asset base. Our dividend is extraordinarily well covered with a 56% FFO and a 70% CAD payout ratio. Our five-year dividend growth rate has been 5.3% versus a peer average of 3.6%, and we have grown our CAD during that same five-year period at a 7.8% annual rate versus a peer average of less than 4%. In quickly looking at some investment activity, during the first quarter, we made two announcements. We are very excited to have been selected by the University of Maryland as the exclusive developer for a five-acre mixed-use development located within the university's Discovery District.
This project will consist of innovation research, life science, and multi-family residential units. Prior to commencing any development, we need to obtain local zoning approvals and complete the design development process. We also would target 50% pre-lease before we start the first phase. Design development is underway now. We hope to receive approvals by the second half of 2022, and the first phase, again, subject to the pre-leasing standard and market conditions, consists of about 250,000 sq ft of space. In addition, we had another announcement that in order to meet the growing need for immediate lab space delivery in University City, Philadelphia, we have partnered with the Pennsylvania Biotechnology Center to create a 50,000 sq ft life science incubator that will be located at Cira Centre. The project is named B+labs and will open in the fourth quarter of 2021.
Since the announcement just a few weeks ago, we've already built a pipeline for about 35% of that space. From a production asset standpoint, all of our Garza, 4.650 Park 155 King of Prussia Road are all approved, priced, ready to go subject to pre-leasing, and we continue to see increasing demand for those types of products. In looking at our existing development pipeline, for Schuylkill Yards West, that project commenced construction on March the first. The project will be built to a 7% blended yield. It will consist of 326 apartment units, 100,000 sq ft of life science space, 100,000 sq ft of high bay innovative office, and street retail. We have a very active pipeline for this project, for both the life science and the office components.
As we noted in the supplemental packs to the press release, we are proceeding down the path on a construction loan financing package and expect to close that in the next 90 days at a 65% loan to cost. Given the front-loading of the equity commitment of the $100 million, we don't really expect the first construction loan draw to occur until the tail end of the first quarter of 2022. On 405 Colorado, that project has achieved substantial completion. We currently have a pipeline of just shy of 300,000 square feet of space. Activity is definitely picking up. We've had four new tours in the last week alone and are under an LOI for a full floor user that we hope to convert to a full floor lease in the next 30 days. 3000 Market, it was our 64,000 sq f t life science renovation in Schuylkill Yards.
That project will finish construction later this year. The building, as is disclosed, is fully leased for 12 years, with the lease commencing Q4 2021 at a development yield of 9.6%. Some further amplifications on Schuylkill Yards and an update on Broadmoor. Within Schuylkill Yards, the strong life science push continues. We've noted, the overall master plan can accommodate about 3 million sq ft of life science space. Our plans for 3151 Market, our 500,000 square foot life science building, is well underway. Pricing is done, design development is complete, active marketing is underway, and we have a very healthy pipeline and are in discussions with several key tenants. Our goal does remain being able to start that project, assuming market conditions permit, later this year.
Another note on Schuylkill Yards, as we previously mentioned, we are converting floors two through nine in our Cira Centre building to life science. That's a total of about 188,000 sq ft. The incubator will take about 50,000 sq ft of that. We've already leased about 47,000 sq ft of that to other life science tenants. We have about 91,000 sq ft of near-term life science space delivery that we can also achieve within Cira Centre. On Broadmoor, we are advancing Block A and the first phase of Block F. That aggregates 350,000 sq ft of office and 613 apartment units at a total cost of about $360 million. As we mentioned on the previous call, we are looking for a partner on that project.
We have received excellent responses from very high-quality institutions, and we'll make a selection in the next week or so, and then proceed through documentation and debt financing shortly thereafter. Our plan remains to start the residential component of Block A, which is 341 units at a cost of about $119 million, by Q3 2021. The office start of 350,000 square feet is targeted to commence upon achieving a pre-lease. We have decent activity that we're focused on there. With that, Tom will now provide an overview of our financial results.
Thank you, Jerry. Our first quarter net income totaled $6.8 million, or $0.04 per diluted share. FFO totaled $60.2 million, or $0.35 per diluted share, in line with consensus estimates. Some general observations for the first quarter. While the results were in line, we did have a number of moving pieces and several variances to our fourth quarter guidance. Portfolio operating income totaled about $68.5 million, was below our fourth quarter estimate. The main reasons for that was lower parking revenue as work guidelines restricted people coming back to work and recommended working from home. Residential was below our expectations. Our operations, primarily FMC, remained soft, primarily from the results of both UPenn and Drexel being primarily virtual. Snow, we had some snow removal costs that were above forecast. While we do get very good recovery, we did experience higher net operating costs.
Termination of other income totaled $2.1 million, or $1.9 million below our fourth quarter guidance. The results were negatively impacted by one transaction that we anticipated to be classified in other income, was actually recorded as a reduction to G&A expense. Land gain and tax provision totaled about $2 million, or $1.5 million above our fourth quarter guidance. We recorded a land gain associated with our contribution of our interest to the Schuylkill Yards West joint venture. That was not forecasted. We had a forecasted land gain of a half million dollars that didn't occur and was delayed and we anticipate occurring in the second quarter. G&A expense totaled $6.6 million or $1.4 million below our $8 million fourth quarter guidance. The decrease was primarily due to the reduction in our other income guidance, which I just mentioned. That was partially offset by higher professional fees at year-end.
FFO contribution from our unconsolidated joint ventures totaled $6.3 million, slightly below our fourth quarter guidance. Our cash and GAAP same story yields, as Jerry mentioned, came in below our targeted range, partially due to a tenant move-out in the suburbs, but also due to the reduced parking. That tenant has been backfilled and will take occupancy later this year. Our first quarter fixed charge and interest coverage ratios were 4.1x and 3.8x respectively. Both metrics remain consistent with the fourth quarter. Our first quarter annualized net debt to EBITDA increased to 6.5 and is above our current 6.1-6.3 range. The increase is due to lower NOI, sequential NOI from the fourth quarter. We do expect this metric to improve with increasing NOI during the second half of the year.
As far as other reporting items, Jerry did mention collections has been excellent at roughly 99%. Less than 100% of deferrals was in our results for the first quarter. Portfolio changes, 2340 Dulles Corner, as previously discussed with Northrop move-out, we have placed this property into redevelopment, and we were included on our redevelopment page in the second quarter supplement as we complete our final plans and underwriting. 905 Broadmoor, with the expiration of the IBM lease, we have taken this building out of service, and it will be demolished at a future date as part of our overall Broadmoor master plan. As a result of that, we did have Broadmoor taken out of our same store and leasing statistics as of 1/1 of this year.
Looking more closely at the second quarter guidance for this year, we anticipate the second quarter results will be lower than the first quarter, primarily due to some of the one-time items mentioned previously, as well as the move-out of 905 from our leasing as it gets retired. We have some general assumptions. Portfolio operating income will be about $68 million and will be sequentially flat from the first quarter, while primarily due to lower operating expenses, including snow, which will be offset by the Broadmoor building being taken out of service. FFO contribution from our unconsolidated joint ventures will total $5.5 million for the second quarter, a 1.3 sequential decrease, primarily due to some leasing at Commerce Square and our MAP Venture. G&A, our second quarter G&A expense will increase from $6.6 million-$8.2 million. The sequential increase is primarily due to the one-time first quarter decrease.
Interest expense will approximate $16 million, capitalized interest will approximate $1.7 million. Termination fee and other income will total about $1 million for the second quarter. Net management and leasing and development fees will be about $3 million. The $700,000 decrease from the first quarter is primarily due to the timing and volume of leasing commission income. Interest in investment income will total $1.7 million, consistent with the first quarter. Land sale and tax provision will be about $1.1 million, generating proceeds of about $12 million. The 2021 business plan also assumes no new property acquisition or sales activity, no anticipated ATM or share buyback activity, and no finance or refinance activity. Our capital plan remains fairly straightforward. Our CAD remains unchanged at 75%-81% range. We have common dividends of about $98 million, revenue maintain capital of $30 million, revenue create of $35 million.
Based on the capital plan outlined above, our line of credit balance will be approximately $132 million, leaving $168 million of line availability. The increase on projected line of credit is partially due to the build-out of the remaining. From last quarter, our increased line of credit is primarily due to the announced incubator at Cira Centre. We also project that net debt to EBITDA will remain in a range of 6.3- 6.5. The main variable between timing is the development activity. In addition, our debt to GAV will be in the 42%-43% range, and we anticipate our fixed charge ratios will remain at 3.7, and our interest coverage around 4. I will turn the call back over to Jerry.
Tom, thanks. I think the key takeaways are our portfolio and the operational platform is really in solid shape, and our team has done a really wonderful job of getting excellent visibility into what our tenants are thinking, how they're reacting to the return to work timeline, and we're doing everything we can to aid them in that process, including, as we've mentioned on previous calls, doing a number of pro bono space planning exercises to make sure that they have the option of kind of evaluating how they want to reconfigure their space. Our leasing pipeline does continue to increase as tenants start to reemerge from the work from home mentality. Safety and health issues both in design and execution are really becoming tenants' top priorities. We're hearing that from more and more prospects.
We really do believe that new development in our trophy-level inventory will benefit from this trend. A good data point is the pipeline in our development projects increased by 23% during the quarter, evidencing that real focus of the quality. I think strategically, we have some very robust forward growth drivers that remain very much on target. We have two fully approved mixed-use master plan sites that can double our existing inventory, diversify our revenue stream, and drive significant earnings growth. Our planned 3 million sq ft of life science development can create a real catalyst to accelerate the overall pace of the development at Schuylkill Yards. We have a very attractive CAD growth over the last five years and have created a very well-covered and attractive dividend that's poised to grow as we increase earnings.
Private equity is abundant, the debt marks are incredibly competitive, evidenced by the 65% loan, the cost of Schuylkill Yards West. Strong operating platforms like Brandywine are gaining significant traction for project-level investment, as evidenced by the really strong activity we had in our Broadmoor marketing campaign. Our partnership at Schuylkill Yards West reinforces that more and more smart investors are beginning to focus on the emerging life science market here in Philadelphia. I guess as usual, we'll end where we started, which is we hope you all are doing well, and that you and your families are safe. With that, Sarah, we're glad to open up the floor to questions. We do ask that in the interest of time, you limit yourself to one question and a follow-up. Thank you very much.
Thank you. To ask a question, you will need to press star then one on your telephone. To withdraw your question, please press the pound key. Our first question comes on the line of Craig Mailman with KeyBanc Capital Markets. Your line is now open.
Hey, good morning, guys. Jerry, just curious, on the commentary around improving kind of tours and the pipeline, are you seeing any geographic kind of concentrations of better strength or even weakness?
George and I will tag-team that, Craig. I hope you're doing well. What's actually kind of interesting is when we look at some of the data points, actually our highest level of virtual tour activity, by a wide margin, occurred in Philadelphia CBD. That was probably one of the markets that we're in that had the tightest return to work guidelines in place. That was followed by the Pennsylvania suburbs, again, evidenced by the restrictions in the Commonwealth of Pennsylvania. Met D.C. came in third in terms of the overall sum of the views. Austin was in last place there. George, maybe you can add some color to the dispersion of the pipeline.
Yeah. Just quickly, Craig, on physical tours, kind of the same dynamic. Philadelphia outpaced physical tours by 120% in the first quarter. The pipeline, again, is somewhat evenly dispersed. Some of that has to do with the amount of inventory that each of our regions have. We don't have as much inventory in some markets as others. Jerry mentioned that between 1676 and 2340 Dulles, that pipeline in Northern Virginia is about 600,000 sq ft. CBD, again, Commerce is kind of outside of our quoted pipeline statistics since it's technically in the joint venture. The pipeline continues to build at Commerce. It's right now about 120,000 sq ft on both the Macquarie and Reliance give backs. In traditional CBD, again, we're seeing good activity on the upcoming rollover by Comcast, Dechert, and Baker.
Okay. That's helpful. Just, I'm kind of curious, relative to past downturns, is this kind of a normal pattern that you've seen where tours have increased this quickly? Do you think just the increased availability of space broadly in some of your markets, whether it be sublease or direct, do you think that there's a lot of double counting? It seems like a lot of brokers and companies are saying that tour activity is up pretty meaningfully for them. Do you think it's really an increased pool of tenants, or just tenants are looking at a broader swath of space, and so there's a lot of overlap in terms of what people are seeing?
Yeah, Craig, that's a great question. Again, George and I will tag team it. I'm not sure any of us have been through a downturn like this because we literally had the brakes on activity for almost 12 months, with the only real notable deliveries being lease negotiations that were in process. I think when we talk to a lot of brokers in all of the markets, I think there'll be a significant ramp-up, as companies are really now beginning to focus, I think for the first time, to a programmatic return-to-work timeline. I know even down in Austin, the amount of sublease space has gone down based upon reported results. Levels of activity are certainly much stronger in the first quarter than they were in the fourth quarter, with a real acceleration month by month during the first quarter.
I know we look at our pipeline and kind of assess the pace of deal flow. It seems that a lot of tenants who are in the marketplace really fall into two categories. One, they need to get out and sort of take a look at office space, but they don't really have any time pressure to make a decision, but they're trying to think through what their decisions might be in the next nine to 12 months. We're also seeing a fair amount of tenants who do need to make a decision in the near term, and we're seeing some of those timelines get increasingly compressed. George, what else can you add?
Yeah, I think one of the other dynamics that we're seeing, there's a number of tenants that are kind of out looking at everything from existing vacancies to sublease opportunities because they're now going through the need or the desire to reconfigure their space. They're taking a little bit maybe of a wider look than maybe they would have traditionally. I think, obviously, different than just a financial crisis rebound, I think, coming out of a pandemic and health and safety workstation locations and turning radius within the space. I think all of those things have led to an increased level of interest, both virtual tours, physical tours, et cetera.
Great. Thanks for the color.
Thanks, Craig.
Thank you. Our next question comes from the line of Manny Korchman with Citigroup. Your line is now open.
Hey, Jerry, you mentioned, I think the way you framed it was pro bono space planning. I don't know if that's for existing tenants or new tenants or the like, but what's coming out of those exercises? As you go through those, what interesting tidbits or lessons are you coming up with how space may change now?
Manny, when I say we have an in-house space planning firm and some very good relations with some outside firms. A number of months ago, we moved to create a tenant communication where we're able to suggest to our tenants, if any of them wanted to go through a space planning exercise, that we would help them think through that through our internal resources without charging them. I think the results have been all across the board. I think that the trend line has been that tenants are definitely looking for a higher percentage of private offices, more circulation patterns, higher profile and larger workstations, maybe multiple gathering areas versus one central commons. I think, George, in terms of the numbers, we've had a couple of expansions come out of it.
Yeah, just during this past quarter, we executed two expansions within the existing tenant base, both out in the Pennsylvania suburbs. We've got two others that we've actually advanced to lease amendments with. Again, it was just a matter of they needed to take down a little bit more square footage really more in how they wanted to alter their physical space as opposed to just internal growth within their business.
I think one of the other data points we're hearing, Manny, and I'm not sure if you see this through the other companies you follow, but there is a lot of continued distance over what percentage of employees will be on near or full permanent work from home. We've talked to a number of leaders of our 1,200 tenant base, and we've seen that thought process evolve significantly over the last 12 months, where certainly more and more companies are recognizing the value of having people together physically. I know just anecdotally in conversations I've had with some large companies, where they've been targeting X% of employees are going to be on work from home. They're getting a lot of pushback. I think they're hearing that employees would like the optionality of working from home, but not being permanent work from home employees.
Even those that are in either one of those categories are creating a lot of pushback about giving up a set place in the office for them to come to when they return to the office. That's why I was saying earlier, I think it's like a three-quarter-plus type of transition as companies really start to think through having to, number one, sequence people back in, but then once people are in, what they think the durability of concern is about the COVID-19 and its impact on the workplace.
Thanks for that. Just on the Maryland deal, you're now adding another sizable project to the pipeline. You've got Schuylkill going on, you've got Broadmoor, which you're going to bring in a partner. You've now committed to new, I guess you'd call it master plan development. Just how do we think about, A, capital funding for all of it, and B, why introduce Maryland to the mix when it hasn't been a core market for you, or you don't have a standing relationship or hadn't as of yet with the University of Maryland?
Yeah. Manny, thanks. It's a great question, and thanks for raising it. Look, from our perspective, I guess our experience has been that working with universities are a solid long-term business that can generate both value creation and fee opportunities for us. Given our work with a number of other universities, we've developed a bit of a franchise in this area. We have a number of universities always reaching out to us to bid on master plan work or provide consulting services. I guess what we're saying is universities and healthcare systems are often seeking outside help to think through their real estate strategy so they can add value to their franchise.
From Brandywine's perspective, engaging with these types of organizations really create great connection points for us within the entire university system, from administration to faculty, board members who tend to be business and civic leaders, community groups that do business with the university. It really has been a great source of business development for us, community and tenant networking. What's interesting is now a lot of these universities are now becoming incubator spaces for a number of companies that they plan on spinning out. When we looked at the University of Maryland opportunity, it's obviously a prestigious university with some very dynamic growth drivers, particularly in quantum computing. As we assess the staging of that opportunity with the rest of our pipeline, the transaction with Maryland is obviously much smaller in scale than Schuylkill Yards or Broadmoor.
We have at least a year plus to go through an approval process before we could even contemplate starting ground. We have a lot of flexibility under our transaction with Maryland and their development subsidiary, Terrapin Development Company. So we have real flexibility in terms of when we start a project. And part of the project construct is we would not start that without a significant pre-lease. The returns we've underwritten there through all of our due diligence are the same as Schuylkill Yards and Broadmoor, i.e., around 8% for office and mid-sixes for residential. And as I mentioned, we can build this out in phases. The first phase would only be about $100 million, again, with heavy pre-leasing.
As I did touch on, I think, there's a tremendous amount of private capital out there that is very focused on doing business with companies like Brandywine and in proven locations like university ecosystems. Even on the residential component of that transaction, Manny, we've already been approached by a number of companies looking to take that on as either an investing partner or in its entirety. We think it's a good long-term value driver for us. We view that differently than just a one-off investment in the Maryland marketplace, that it's really tied into an overall university system that has a lot of growth potential.
Maybe one last one from me. You talked about more conversion of space to life science. Given that converted space is very much in an office building, when you say life science, do you mean that the tenant is going to be in the life science sector and using it for office space? Do you mean life science in terms of R&D space? When you and maybe others in the space use that term life science, it can mean a whole bunch of things. When you're talking about life science conversion, and this is different for the ground-up stuff, but for the conversions, what do you mean when you say we're converting, whatever it was, eight floors, four floors to life science?
Yeah, I think as we contemplate it, I'll give you a couple of specific examples within just Cira. A good portion of the 47,000 sq ft that's been leased during the conversion is primarily officed by a life science company. Our incubator, which is 50,000 sq ft, that'll have essentially 170 biology benches and private labs, 43 chemistry labs. It'll have a small component of coworking and about 15 private offices. That's primarily real lab space. When we talk about it generically and looking at the balance of that conversion opportunity, we're targeting that being somewhere around a 50/50 office and lab split. Does that answer your question?
It does. Thanks, Jerry.
Okay, Manny. Thank you.
Thank you. Our next question comes from the line of Anthony Paolone with JP Morgan. Your line is now open.
Thanks. Good morning. Jerry, you emphasized this flight to quality that seems to be unfolding. Can you give a little bit more color on what that means in terms of whether it's buildings, services, sub-markets, and also whether it moves the line, so to speak, in your own portfolio that brings about more non-core assets that might have to be sold in the future?
Tony, good to hear from you, and George and I will tag team this as well. I think when we talk about a flight to quality, it really revolves around a couple of key pieces. One is what the existing building infrastructure is relative to all the mechanical, electrical, and of other factors, vertical transportation speed, the level of filtration systems, the amount of fresh air intake. If you think about it from our production cycle, it's all the items that used to be on page 47 of a 50-page RFP, which are kind of the technical specs. They're now on page two or three. Every major company, and actually the larger the company, the more acute the level of examination, is on what the building can physically present from a platform standpoint. That's point one.
Point two is they're really looking for the level of on-site management expertise, i.e., the quality of the building operating engineering staff, the qualification of the property management teams. I think this pandemic has really shown a true bifurcation of landlord service delivery platforms. Those buildings that have really high-quality on-site management with the technical expertise by the operating engineers really fare much, much better on that evaluation point than those that don't. The idea of having an incented, i.e., ownership-based on-site management is becoming a point of increasing examination. Third point is the inquiries relative to the capital investment program and the preventive maintenance programs that these buildings can present to prospective tenants.
Tenants now, again, are very keenly focused on not just the building today, but does this owner have a track record of actually reinvesting in physical plant to make sure that those elements of the space that are very important to life, safety, et cetera, are demonstrated through a long history. I don't know, George, do you have anything else you want to add?
Yeah. Further adding on to that, I think sometimes also are just the amenity programs that you can build and provide within those buildings, just based sometimes merely on the fact that some of the trophy buildings are bigger than others, and there's just a flight to quality for all of those things. The capital investment, I think, is a key part of it that Jerry touched on. We put between $6 million and $8 million of base building capital upgrades into our portfolio on pretty much an annual basis. That ranges everything from HVAC to elevator to restroom filtration change systems, and the like. I think it's that commitment, the service level that we can provide. Also sub-market location. I think some sub-markets obviously have a predominance of that.
We feel good about our Radnor portfolio and the fact it's one of the trophy inventory sectors of the Pennsylvania suburbs.
I think, Tony, the second part of your question, look, I think one of the things, when we look back over the last several years within the company, we've done a pretty effective job in moving a lot of the lower-quality inventory out of our portfolio. I think that was evidenced by the last transaction that we did via joint venture. We view those as non-core for us in terms of our wholly owned operating platform. Tom, George, Dan and I, and the rest of the team are always constantly evaluating on a quarterly basis, the relative performance of every building within our portfolio, and what we need to do to either reinvest capital to change the NOI trajectory. If we do that, can we actually change the NOI trajectory, or should we look to move that?
I think that will always remain a part of our capital allocation strategy, to look and identify on a relative basis within our portfolio, what will be the laggard performers in terms of growth and capital ratios, and look to move those out. As we stand right now, we think we have the portfolio in an extremely good position to respond in every one of our sub-markets to tenants' increasing focus on this quality issue.
Okay. Thanks for that. Just my other one is on the key vacancies I think you talked about that should drive $0.10 of earnings. Can you refresh us on how many square feet that is, what those are, just to track that $0.10 and those specific blocks?
Sure. Absolutely, Tony. We've identified within the wholly owned portfolio, these are basically nine suites slash buildings, the largest of being 1676 down in Tysons. We've got about 175,000 sq ft left to lease down there. Next largest is a 40,000 sq ft block in Radnor. It was formerly a fitness center. We've got lease negotiations going on on a backfill use for that. 36,000 sq ft still down in Austin, Texas, that was formerly SHI at One Barton Place. We had a full-floor block at Two Logan that we've now leased, so that's kind of come off the table. We have a 25,000 sq ft block out in Plymouth Meeting. All in all, it's about 400,000 sq ft . We've leased about 100,000 sq ft of that thus far. We only had 200 of that 400 in our 2021 business plan.
We're about halfway done with what we had in the 2021 plan. The balance of it obviously is slated to fall into the 2022 plan. We're doing everything we can to put that space away today and just solidify the 2022 NOI.
Okay, great. Thank you for that.
Thanks, Anthony Paolone.
Thank you. Our next question comes from the line of Jamie Feldman with Bank of America. Your line is open.
Talk a little bit about net effective rents. Where do you think, if you think about your major markets, CBD Philly, suburban Philly, Austin, how much do you think they've moved during the pandemic, and where are they now? You think they're stabilizing? Just some more color on that key topic.
Yeah, Jamie, good morning. This is George. During the pandemic, I would say they really haven't moved much at all. I think some of that is some tenants looking maybe for a little bit more of a free rent package and trading that off for the TI package. We continue to kind of assess the entirety of the concession package, weigh that up against length of lease term, the bumps. Sometimes we've seen deals where the bumps may be slower at first and larger on the back end to kind of preserve that net effective rent. Pandemic specific, we haven't really seen a deterioration in net effectives.
Just to confirm, you're saying they're pretty much where they were in late 2019?
Yes.
Okay. This is across every market?
I would say yes, for the most part. I think where you're sometimes most challenged is just where you've either got one big block of vacancy you're trying to move or you've got an overwhelming amount of sub-market vacancy that you're competing with. We've seen a little bit maybe in Tysons, where it's gotten a little bit more competitive. We kind of assess that as the pipeline builds, we kind of know where we need to be to make deals, and we pivot accordingly when we have to.
I think, Jamie, just to add to that, one of the things we are keeping a watchful eye on is it has an impact on net effective rents, but it's not really driven by the pandemic or demand drivers. It's been the escalation in construction costs. We have seen prices of steel, lumber, a number of other construction materials, glass really ratchet up quite a bit. That is, as we go through certain tenant pricing exercises for space, the TI costs may come in north of our target, and that may create some downward pressure going forward. It's not necessarily a rental concession per se, due to the pandemic. It's more a function of what we're hoping will be a transitional blip in construction pricing.
Okay. That's helpful. Thank you. You had talked about doing maybe a 24-month forward view on expirations. Are there any new move-outs that you guys weren't thinking about before that have popped up or that people have given you notice on?
No, there really aren't. The list has kind of remained the same, and we continue to chip away at that. Yeah, no new ones. The larger ones that we've spoken about with Comcast, we've got pipeline on two of those three floors. Decherts' 2-floor give back in 2021, we've got pipeline on that. We've got active deals to backfill all of the Baker give back in the first quarter of 2022. Really 2021- 2022, in pretty good shape. It's really three leases over 10,000 sq ft in 2021 and four leases over 50,000 sq ft in 2022.
Okay. All right. Thank you.
Thanks, Jamie.
Thank you. Our next question comes from the line of Steve Sakwa with Evercore ISI. Your line is now open.
Thanks. Good morning. Jerry, I was just wondering if you could comment a little bit on Austin. It seems like that market has been a big beneficiary of a lot of movement, whether it's from California or other markets. I'm surprised maybe the pipeline isn't a little bit stronger or demand isn't a little better, either for some of the developments or maybe week four or five. What are your expectations for leasing in Austin over the next 12- 24 months?
Sure, Steve. Look, we think the pipeline in Austin continues to build. I think the first quarter numbers, this is a market-wide commentary, not just Brandywine. I think there was a level of disappointment with the first quarter leasing numbers coming through Austin. Based on very recent conversation, not just with our team, but with other market prognosticators.
There's a big pipeline coming. Tour level is way up. In fact, there are some comments relative to it being back to pre-pandemic levels. Just through February, Austin's created 1,800 new jobs, and out of Opportunity Austin, there's 18 new companies in the queue who have located to Austin. 21 companies expanding. I mentioned we've seen a tremendous upsurge in activity at 405. Now that building's done. Lobby's pretty much complete. Sky lobby's pretty much there. Garage is ready to open. We're getting a lot more traffic through the building, is ready to be lit at night. It's getting to be much more of a recognizable stopping point on tours. We've seen the number of tours tick up. Hopefully, that translates into an increasing pipeline.
When we take a look at our Broadmoor development, there are a number of larger tenants in the market. We're certainly talking to a number of those. No assurances those deals will come to fruition, or we'll make them. We're in the fray for every major deal in the marketplace. I think in the southwest where Garza is, we're still waiting for some of that tour-level activity to pick up. Generally, we're feeling very good about where we are in Austin. I think the 405, we think, has a convertible pipeline that will put that project in good shape as we enter 2022. With the marketing launch of Broadmoor, particularly with the commencement targeted of the residential start, we think that will show real activity at Broadmoor. We think that will generate even more activity coming to the office building. We're very encouraged.
Tracking both through our own very talented team, the key brokers in the market, conversation with other business leaders, including the chamber, Opportunity Austin, and political leaders. We think Austin is in a very good position with a lot of eyes outside of Austin, looking at Austin as a potential place to go.
Great. Thanks. The second question, maybe just going back to your construction cost comments and kind of increase in steel and other inflation pressures. How are you sort of looking at some of the near-term development starts, whether it be 3151 or the developments at Broadmoor? Have you kind of recosted out those projects, and based on current rents today, do those deals still pencil for you?
Yeah. How we approach that, I think, Steve, we take these projects all the way through full construction documents, so 100% CDs. We're doing iterative pricing all the way through so we can value engineer properly. Once we get the kind of pencils down on the drawings, we're pricing including not only talking to GCs, but also the pool of subcontractors. It's a fairly dynamic process, so we're staying in very close touch with all of the various subs, trades, and GCs on every one of our development projects. What we've seen thus far is while there's been some upward pressure, we've been able to keep within the relative band of all the projects still working.
Certainly, as we price things through with these GCs, we ask them to give us a pricing metric based upon us giving them a notice to proceed within the next three and six months. We've got a little bit of a forward window into what we think the pricing would be a quarter or two from now. We also have a team that tracks all the futures markets. Even while steel on a spot basis is up over 20% in some of the commodity-level steel components, futures are down. We're certainly talking to a lot of steel fabricators. Just doing the same thing on precast curtain wall. It's really kind of an ongoing daily process by our construction team and development professionals staying on top of all the major component parts of every one of these buildings.
I think as we stand here today, I think we're in pretty good shape across the board.
Great. Thanks. That's it for me.
Thank you, Steve.
Thank you. Our last question comes from the line of Daniel Ismail with Green Street Advisors. Your line is now open.
Great. Thank you. Just a quick one for me. Weighted average lease terms came in below recent averages. I'm curious if that was just related to several large leases or if this kind of lower lease terms are expected for the rest of the year.
Yeah. This is George. Great question. It really is just based on kind of the volume of deals and what we had in this first quarter leading to that 3.3-year average lease term is last year during really the start of the pandemic, we started reaching out and did a number of one-year extension, two-year extension leases, where the end result of that lease then commenced with its extension during the first quarter of 2021. We had done a one-year extension with Decherts at Cira Centre for 12 months a year ago. You had 109,000 sq ft with only a 12-month term that kind of really skewed the commencement to this quarter. Now we've also further extended them, and that lease will be reported in first quarter of 2022 when it naturally commences.
It was really just a combination of one large lease and a number of others that were just short-term in nature, kind of just extend expirations as a result of the pandemic.
Okay. As you look at the rest of your pipeline and discussions with tenants, there's no conscious choice to reduce lease terms as a result of the pandemic?
Yeah. Daniel, you're coming in kind of weak. Did you ask if there was a part of our strategy was to do shorter-term leases?
Oh, apologies. Hopefully I'm coming in better now.
Yes.
My question was related to, are tenants consciously deciding to lower lease terms as a result of the pandemic for the rest of the pipeline?
Yeah. I can't say that they are. I think, again, sometimes it just comes down to each individual tenant's kind of comfort level on how long they want to go. We're still seeing larger deals still wanting that 10- to 15-year lease period. Sometimes they will want to negotiate an early termination sometime throughout that term, but that's no different than it was pre-pandemic.
Yeah, no. Just to add, Daniel, just to add on to George's comment. Look, when we take a look at our development pipeline, they're all 10- to 15-year proposals. That's not meeting any resistance at all at this point. I think the theory behind your question, I think that remains to be seen depending upon when we get full visibility into the overall market, whether some tenants will be more of a mindset to do three- to five-year deals versus longer-term deals.
We certainly have the flexibility to do that within our business model. B+labs it's all about how you maintain the same as the level of net effective rents. We've had some very good success with some of our pre-built spaces, offering flexible lease terms on that. There's clearly a subset of the tenant universe that will pay a premium for a shorter-term lease. That premium can be more than adequate compensation for the incremental capital. Look, we're already seeing that just even at the incubator location. We're offering anywhere from one-month deals up to multiple years. In the proposals the team has out, the level of premium tied directly correlates to how short the term is. We think that will be a key part of every office company's business plan going forward.
I just don't know how big it will be or how durable that trend line will be. We're still seeing from a number of large companies that we're talking with on the development side, they still want to have their corpus, their home, their cultural platform. We're not seeing any kind of additional requests for expansion or contraction rights, or even, as George touched on, anything that deviates from historical norms on the early termination process.
Makes sense. Thank you, gentlemen.
Thank you. This concludes today's question and answer session. I would now turn the call back to Jerry Sweeney for closing remarks.
Great. Thank you all for participating in today's call. We look forward to updating you on our business plan activity on our next quarterly call. In the meantime, please stay safe and healthy. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.