Ladies and gentlemen, thank you for standing by, and welcome to the Brandywine Realty Trust First Quarter 2020 earnings call. At this time, all participants' 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'll 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, Mr. Jerry Sweeney, President and CEO. Sir, you may begin.
Crystal, thank you very much. Good morning, everyone, and thank you for participating in our first quarter 2020 earnings call. On today's call with me are George Johnstone, our Executive Vice President of Operations, Dan Palazzo, our Vice President and Chief Accounting Officer, and Tom Wirth, our Executive VP 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 we file with the SEC.
Well, this is no ordinary time. First and foremost, all of us at Brandywine sincerely hope that you and yours are safe, healthy, and sheltering in place as happily and as productively as possible. The pandemic has disrupted everything and presented a new landscape for everyone and every business. While the duration of the crisis remains unclear, we have assessed the crisis' impact on every element of our business, employee, tenant, vendor safety, and security, a return to safe building operations, construction schedule delays, forward leasing pipeline and renewal activity, and of course, all the related financial implications. Additional details on these and other topics are outlined in our COVID insert found on pages one to 13 of our supplemental package. Looking at the first quarter, we opened the year strong. Our first quarter results were among the best we've had in recent years. We had excellent leasing activity.
Rental rate mark-to-market was almost 16% on a GAAP basis and 8% on a cash basis. Same-store numbers were tracking slightly ahead of our original plan. Capital costs were at the low end of our targeted range. Our retention rate was 76%, and we posted FFO of $0.35, which was in line with consensus. Our leasing pipeline was building nicely, including some excellent forward leasing activity on several of our development projects. That strong start is, of course, in the rearview mirror and all somewhat irrelevant given the circumstances, our entire focus is on the path forward. As we turn our attention to the impact of the virus, it's important to reflect on where we are and how to extrapolate the current situation to the near and intermediate-term future. Several observations from our team before we outline our 2020 strategy.
We have a 25-year track record of building strong employee culture and establishing lasting relationships with our tenants, vendors, and communities. Never has the time for having built those bridges been more important than today. We have erred on the side of over-communicating with all of our stakeholders. To paraphrase a number of behavioral scientists and economists, how people behave in a pandemic is not really a great guide to how they will act or live their lives in normal times. As one person put it, we're living in the middle of a grand forced experiment, and we really don't know how that experiment is going to play out. While we have stayed in close touch with our tenants, vendors, political and community leaders, the path forward and the pace we walk down that path is somewhat uncertain.
Please note that in developing our 2020 COVID revised business plan, we have pragmatically assessed forward risk and incorporate all those assumptions into our plan. Given the current circumstances, this plan is as accurate as we can make it. Third, every crisis embodies elements of both danger and opportunity. Our clear priority has been to assess every element of risk and institute plans to effectively mitigate or anticipate its effects. We are also, however, focused forward on the opportunity set to anticipate situations where we can enhance our business plan execution, whether that be through extending lease terms, improving the pricing of our current supply chains, or working with institutional partners to seek opportunities where our market position, talent base, and capital can create growth opportunities.
In looking at the risk factors in our COVID-19 business plan, our first priority is the safety and security of all of our employees, tenants, and buildings. We are very happy to report that no Brandywine employee has contracted the virus, and consistent with applicable state and CDC guidelines, we have maintained a doors-open, lights-on approach to all of our building operations and maintained close communication with our tenants, vendors, and local health and municipal officials. Secondly, we focused on the stability of our economic platform with particular attention to each of the following items. Rent collections. Given that these are no ordinary times and the stay-at-home order is in effect, we did receive requests from tenants for rent deferrals. Full details of those efforts are found on page nine of our SIP. Bottom line, we have about 1.6% of our rents coming from retail tenants.
Normal monthly billings run about $500,000. We received $150,000 in April. 29 tenants or 45% of leases have been or are in the process of documenting rent deferrals. About 2.1% of our rents come from co-working and conferencing tenants. Normal monthly billings are $675,000. During April, we received $580,000. For April, we received 95% of overall rents, 96% collection rate from our office tenants, and 100% collection rate from our top 30 tenants. The vast majority of rent relief requests are from our retail and co-working tenants. At this point, there have been no rent abatements granted. Rent deferral situations are paid back to us either in 2020 or 2021 or via lease extensions. Just a point as well. Our leases are clear in that our tenants have a legal obligation to pay us rent.
While we certainly recognize every company wants to preserve cash, the legal obligation to pay us rent is clear. As we have done over our history, we'll certainly work with those companies that truly need bridge assistance. From an insurance standpoint, it's also clear that we can't rely on our standard property policy to reimburse us for rent not paid by tenants in default of their contractual obligations. We did, however, have the foresight to procure a $5 million of coverage sub-limit for interruption by communicable diseases under our property policy, which we believe will be operative where we have force majeure claims, such as in the case where you had work stoppages due to government mandates. Due to the uncertainty of the recoverability of these amounts, we have not included any insurance proceeds in our revised business plan. We also were impacted by some construction work stoppages.
The vast majority of our construction operations remain shut down, with the exception of Austin, which was shut down for a period of time, and some of our operations in Met D.C. In our 2020 plan, we're assuming that construction gets back to work in the next 30 days. In fact, in Pennsylvania, our governor last night announced plans to restart the opening of our economy on May 8th and has accelerated the restart of construction, obviously compliant with safe distancing and CDC guidelines on May the 1st. The impact of this temporary work stoppage in our 2020 plan is $2.3 million of GAAP NOI, 218,000 square feet of lower occupancy, which reduces our year-end occupancy by 1.4%. We also spent a significant amount of time looking at our leasing pipeline, which stands right now at 1.3 million square feet.
Our leasing team and executive directors have been in extensive and repeated touch with every prospect and tenant rep of our 1.3 million square foot pipeline. To the best we can determine as of today, we believe that about 52% of that pipeline, or 670,000 square feet, are deals that are progressing. Clearly with the shutdown, the execution timing is uncertain, but we would anticipate within the next 90-120 days. We have about 45% of the deals in our pipeline on hold due to the virus. Of that, based upon the information we have, we think that 10% of those will likely progress to execution. About 70%, it's just simply too early to tell, as a lot of our prospects are focused on their own businesses versus their office space requirements.
We believe about 15% is most likely dead requirements because of the virus, and we expect to lose the balance of about 7% to another competitor. We also spent a great deal of time looking at our capital spend. As Tom will walk through in more detail, we've done a thorough review of our expected spend for the balance of the year and have reduced that spend by $50 million or about 20%. More detail on that can be found on page 11 of our SUP. We did make some adjustments to spec revenue, as you might expect. Primarily due to slower projected leasing and the impact of construction work stoppages, we're reducing our spec revenue target by $5 million to $26 million. Our redevelopment project at 1676 International Drive in Northern Virginia experienced both of these conditions, totaling almost 60% of the slide or $2.9 million.
The timing of our major tenant in that project slid until the first part of 2021, and the additional lease-up that we had projected for the balance of 2020, we have also shifted till next year. Overall, leasing delays total about $2.7 million of GAAP revenue, and the previously mentioned work stoppage of $2.3 million accounts for the balance. With these revisions, we have $1.1 million of revenue and 149,000 square feet to achieve our plan that we outlined in our press release yesterday. From a dividend coverage and liquidity standpoint, the company's in excellent shape. We're projecting to have between $400 million and $480 million available in our line of credit by the end of the year. That number depends on whether we refinance or pay off an $80 million mortgage securing one of our Philadelphia CBD properties. We only have one $10 million mortgage maturing in 2021.
No unsecured bond matures until 2023. We generate $85 million of free cash flow after debt service and dividend payments. That dividend is extremely well covered with a 54% FFO and a 70% CAD payout ratios. In looking at our guidance, we set our new range at $137-$145 per share. The impact of this range on our operating metrics is detailed in both the press release and on page 16 of our SUP. To do a very quick reconciliation, our previous midpoint was $1.46 per share. We did increase, and Tom will talk about during his conversation, our project reserves, which reduced that by $0.02. We did a building sale that cost us $0.01. Our office leasing slides are close to $0.02 a share. The construction slides will cost us $0.01.
We anticipate losing $0.01 through our joint ventures. We anticipate losing another $0.01 through lost parking revenue and the hotel component of our AKA project at the FMC Tower. The share buyback, which we also announced, added $0.03 back. Our new midpoint is $1.41. With those components addressed, we'd like to take a look at the development opportunity set quickly. First of all, on the development front, all four of our production assets, that is Garza, Four Point, 650, and 155 King of Prussia Road, are all fully approved. All work is paid for. They're fully documented. The pricing has been finalized. They're ready to go subject to leasing. As we've noted previously, each of these projects can be completed within four to six quarters and cost between $40 million-$70 million.
Pre-COVID-19, we had a strong pipeline of deals that could have kicked off one or more of these projects. As we look at the crisis now, clearly starting any development is an elective decision and will be evaluated on a case-by-case basis. As such, you'll note in our revised business plan, we have reduced our two projected 2020 starts down to one, which we achieved with the start of our 3000 Market Street project. In looking at our existing development projects at 405 Colorado, as we identified in our supplemental, we did have a disappointment post quarter close. Our lead 70,000 sq ft tenant terminated their lease pursuant to a one-time right to terminate if we did not meet an interim milestone delivery date. Based on the original construction schedule we had, we had a significant cushion built in to meet that milestone.
The general contractor, while still being able to complete the project on time, missed that milestone date. We will naturally have a claim against that contractor, but right now our focus is on getting the project built and leased. That project now stands at 18% leased with 160,000 square feet to lease in what we know will be a very exciting addition to Austin's skyline. We had a great pipeline of deals before the crisis, and we expect that pipeline to reemerge and have been in touch with a number of those prospects. Due to the short construction shutdown we did have in Austin, we did slide the completion date back to Q1 2021, and due to this tenant event, moved the stabilization date back to Q4 2021.
On the Barton building, due solely to the mandated construction work stoppage, we are moving the completion date back one quarter to Q3 2020. Given that building is fully leased, we did move the stabilization date up to the Q4 2020, so that'll be fully stabilized. 3000 Market Street. This is a renovation project within Schuylkill Yards. The 64,000 sq ft building is being fully converted into a life science facility. We're very fortunate to have recently signed a lease with a life science tenant where they will take the entire building on a 12-year lease commencing in the third quarter of 2021 and deliver a development yield of 8.5%. We're really excited. This is truly a great exclamation point to our emerging life science push in University City. Just quick updates on Broadmoor and Schuylkill Yards.
On Broadmoor, we're advancing Block A, which is a combination of 360,000 square foot office building and 340 apartments through final design and pricing. At Schuylkill Yards, we continued the design development process for a dedicated life science building and anticipate that with the schedule we have in place, market conditions permitting, that could start in the first half of next year. On our Schuylkill Yards West project, which is our office residential tower as you know from previous calls, that's fully approved, priced, and ready to go, subject to finalizing our debt and equity structure. Certainly, the virus had a big impact on the timing of this project start. We continue to work with our preferred QOZ equity partner, but the crisis has certainly slowed the pace of procuring financing.
We do remain optimistic that we'll get that across the finish line when the situation returns to some level of normalcy. On the investment front, we sold one property during the quarter for $18 million. We also repurchased net after dividend savings, $55 million of our own shares. Those shares were purchased at a 10.5% cap rate, an 8% dividend yield, and an imputed value of $203 per square foot. As we assessed it, regardless of the trading price of our stock, this was a good investment, delivering both immediate and better returns in our targeted developments, and was paid for via the asset sale and the capital spending reduction of $50 million. To provide a frame of reference, the average cap rates in our markets on asset sales since the Great Financial Crisis has been 6.4% and an average price per square foot of $350.
Both of those metrics more than supporting this investment, as well as when you compare that to current replacement costs between $400 and $600, it further amplifies the validity of making that investment in our own shares. There are a tremendous number of private capital sources actively looking for high-quality investments, particularly with well-capitalized partners. We continue to have an active dialogue with several institutional investors and private equity firms. We are exploring several asset-level joint ventures that would improve our return on invested capital, enhance our liquidity, and provide growth capital. While these discussions are active, constructive, and ongoing, there's no certainty as to their outcome. We continue to pursue and look forward to continued improvement in the debt markets. The last opportunity I'd like to just spend a moment on is the opportunity set embedded in the future of office market demand drivers post the virus.
Whether you believe there'll be more or less demand, more square feet per employee, more work from home, the immutable constant will be that high-quality office space will be a recipient of any demand drivers. Tenants clearly want safe, secure, healthy environments. We do believe that owners of best of class products like Brandywine will be beneficiaries of these future demand drivers. I'd ask you to note the building access security, HVAC elevator items that we have identified in our COVID supplemental package insert. We're also keeping all these potential changes in consumer preferences in mind as we finalize our development planning. Tom will now provide an overview of our financial results.
Thank you, Jerry. We wanted to start off with a review of the net income. We came in at $7.9 million, or $0.04 per diluted share. FFO totaled $61.4 million, or $0.35 per diluted share. Some general observations of the first quarter. Operating results were generally in line with our fourth quarter guidance. Operating expenses from lower G&A expense was $1 million as compared to the forecast. That's due to some timing of some compensation and professional fee recognition. Interest expense lower due to the lower rates that we had forecasted and slightly higher capitalization of interest. First quarter fixed charge and interest coverage ratios were 3.7 and 4.0 respectively. Both metrics improved as compared to the first quarter of 2019. Consistent with prior years, our first quarter annualized net debt to EBITDA did increase as G&A increased.
The increase to 6.7 was primarily due to higher sequential G&A cash used for our stock repurchase. This is partially offset by the proceeds from the sale of a non-core asset not included in our 2020 business plan. Looking at 2020 guidance, as Jerry outlined earlier, we're reducing the midpoint of our guidance by $0.05 per share. The combined $5 million reduction in spec revenue is $0.03 per share. In light of the increased economic concerns from our tenants, we increased our forecasted reserves by $0.02 per share. We did that on a general basis, so not included in our revised same store for now. The non-core asset sale in the first quarter, also including the JV in the fourth quarter, which we didn't adjust guidance for, is about $0.01 a share.
We anticipate similar leasing slides at MAP, our JV, where we're 50% owner, and some slides as well at 4040 Wilson, which did open, did its CO in February of this year. In addition to that, we believe our parking and FMC operations will be negatively affected in the near term, and we're putting a $0.01 share for that reduction. The reduction to partially offset that is the buyback, which is $0.03 accretive. Looking forward to the second quarter of 2020, we have the following general assumptions. Portfolio level operating expenses will total about $80 million. This will be sequentially $3.3 million below the first quarter, primarily due to the $1.8 million increase in some operating expenses. It's timing of R&M. $600,000 due to the lost GAAP income from the non-core asset sale that was there in the first quarter, not there in the second quarter.
One million due to large move-out of SHI Barton Skyway and the lower hotel revenue that we expect to happen at AKA. FFO contribution from unconsolidated joint ventures will total $2 million for the first quarter, which is down $700,000, primarily due to MAP and bringing in 4040 online, which will incur some initial startup losses. For the full year, the FFO contribution is estimated to be $9.5 million. G&A. Our second quarter G&A expense will be $8.5 million, very similar to first quarter. Full year G&A expense will total about $32 million. Interest expense will be $21 million for the second quarter with 95.3% of our balance sheet debt being fixed rate. Capitalized interest will approximate $1 million, and full-year interest expense is approximately $82 million. Capitalized interest will continue to approximate $3.2 for the year as we continue building 405 Colorado.
We extended our mortgage at 2 Logan Square for an additional maturity date from May 1st to August 1st. That mortgage payoff is about $80 million at a 3.9% rate. This loan is very well covered based on the current NOI that's in place, which has grown over time, and we're considering an extension or a refinance of that loan. Termination other income, we anticipate termination fee and other income to be $2.5 million for the second quarter and $11.5 million for the year. Net management leasing and development fees quarterly NOI will be $2 million, and we'll approximate $8 million for the quarter. Land sales and tax provision will net to zero. Our buyback activity, as Jerry mentioned, we executed on the stock buyback in March of 2020 at excellent economic terms at an implied 8% cash dividend yield.
Since the shares were purchased late in the quarter, the weighted average share count did not have any impact on our first quarter results. The weighted average share counts for the year will be reduced to about 174 million, and for the second quarter will be roughly 172 million as our weighted average share count. We have no anticipated ATM or additional share buyback activity in our plan. For investments, we have no other incremental sales activity in our plan. With the acquisition side, we do have the Radnor land purchase, which did occur this quarter, and we still have the building acquisition at 250 King of Prussia Road for roughly $20 million. That will be bought later in the year, and that will go into redevelopment, so no earnings increase for NOI in 2020. Capital plan is outlined.
We took a hard look at our capital spend and have reduced 2020 capital by $50 million. While we reduced our earnings, we have saved on the capital for 1676. The reduced development capital is based on only one development start and 3000 Market being our only development start, and that will just lower the amount of prospective capital we had on the other two development starts. Based on the above, our CAD range will remain at $71 million-$78 million, as the lower capital may be offset by deferred rent that will be repaid in 2020. Uses are outlined as on page 12. We have $91 million of development capital that's being spent. We have common dividends of $97 million, revenue maintain of $36 million, and then we have $40 million of revenue create, and then $6 million of mortgage amortization.
Loan payoff, if we do it, is $80 million, and the acquisition of King of Prussia Road. Primary sources will be cash flow after interest of $182, line use of $150, which would bring us up to the $200 million we've projected, and cash on hand of $33 million, and some land sales that we still expect to have happen later in the year. Based on this capital plan, we would have $200 million outstanding on our line or $120 if we refinance the mortgage. We projected our net debt to EBITDA will range between 6.3 and 6.5, so it's a little higher than where our range had previously been, 6.1 to 6.3. The main reason is the leasing slides that Jerry talked about. A lot of those affect EBITDA in the fourth quarter. When you annualize that EBITDA, it results in a higher net debt to EBITDA.
The lower capital spend offsets the share buyback, that's not affecting it. In addition, our debt to GAV will approximately be 43%. As Jerry mentioned, we have a well-covered dividend, both from an FFO and AFFO metric of 54% and 70% respectively. In addition, we anticipate our fixed charge ratio will continue to approximate 3.7, and our interest coverage to approximate 4.1. I'll now turn the call back over to Jerry.
Tom, thank you very much. We're sorry we ran a few minutes over our normal time in our prepared comments. We thought it was important to frame out the thought process and the new business plan. With that, Crystal, we're happy to open up the floor for questions. As we always do, we'd ask in the interest of time, you limit yourself to one question and follow-up. Thank you.
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star followed by the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Once again, please press star then one to ask a question. Our first question comes from Jamie Feldman from Bank of America. Your line is open.
Thank you. Good morning. Thanks for all the disclosure. It was really helpful, both on the April payments and then just the addition to the supplemental. Thanks for doing that. I guess my first question is on the insurance policy. Can you talk more about how that's going to work and how much it might cover? Is it per instance per building, or is it a blanket coverage of $5 million? Just as much color as you can provide. Do you think it's something that's common across the sector?
Yeah, Jamie. Well, thanks for those comments. Our team really has been working very hard to make sure that we're able to present a high level of transparency of what we're thinking about. On the insurance policy, it's kind of a new territory for me as well. I think we kind of verified that the standard property policy doesn't really provide us the ability to get reimbursed. This coverage, we think, is somewhat unique, but I really can't speak to what other companies do. It would provide us up to the $5 million of coverage in the aggregate. Because we're not sure how insurance companies will respond to this, we excluded any reimbursement from that into our numbers.
We certainly think that, given the provisions of that policy, that where we've had a loss of revenue due to a force majeure event, where we've had to shut down due to the virus and regulatory directive, that that loss of revenue would be at least a claimable item under the policy. When Tom and I were both talking about kind of the work stoppage number we have, which is a couple million dollars, we think that would certainly be something that we would be working with the insurance companies on. I really do think, honestly, this is a whole new area for insurance companies and how everyone responds to this and whether states institute reimbursement legislation for insurance companies remains to be seen. We've seen that in a couple different states.
It's something that we're fortunate we had within as a rider and a supplement in our policy. Certainly to the extent we think we have a great direct path to get money, we will certainly do that.
Okay, thanks. Just to be clear, it's $5 million total revenue coverage if it plays out.
That's correct.
Okay. Can you talk more about the 405 Colorado lease break? Was there any kind of break fee? Is this typical for tenants to be able to walk for this kind of delay? Do you expect to litigate, and how do you think this will play out? Is this another thing we need to be watching across the sector?
Yeah, look, I think this is not something you need to be watching across the sector. I think this is a very unique situation. I will tell you it's the only time we have ever done a transaction where a tenant had a right to terminate based on interim milestone date. We did that really, I think, due to market pressures in Austin to meet market conditions, whether landlords are willing to offer. I think we assessed it, if 405 is only a 200,000 square foot building. They were a 70,000 square foot tenant. We felt as though there was a huge pipeline of demand. We know this building architecturally from a floor plate standpoint should resonate very well in the marketplace. When we agreed to do that, we had plenty of cushion built into the schedule to make sure that we had a good safety margin.
As things turned out, the contractor did fall behind on meeting this interim milestone. We're still on track to deliver, as I mentioned, the project on schedule. Of course, we'll have a claim. Right now the focus is on getting the project delivered. We've reinvigorated the marketing efforts. We have a great team working on it. From our perspective, Jamie, look, it's a disappointment, truly. It's a very unique set of circumstances. We've never done another development deal where we've had any kind of termination right by a tenant based on an interim milestone date. Whereas we thought we made a good judgment going into it certainly turned out not to be the case as things evolved. Again, I think as we look at it's not anywhere near a good news story for us, particularly given the dynamics of the marketplace today.
We do feel as though the pipeline will reemerge. Frankly, also, one of the things we were happy about was our ability to get 3000 Market Street fully leased, just as we're starting the renovations. From an economic standpoint, really help buffer whatever impact would be in 2021. I'm going to give you an example. The trade-off between that lease tenant in Austin at 405 and 3000 Market, the 3000 Market Street tenant will generate more than $800,000 in additional cash NOI than we would have received from the 405 project. Not a great circumstance. We wanted to disclose it as soon as we got notification on it. Rest assured, it's a very unique situation for Brandywine, and I would expect throughout the rest of the real estate community as well. Okay. Thank you.
Thank you. Our next question comes from Craig Mailman from KeyBanc Capital Markets. Your line is open.
Thanks, guys. Just one quick clarification on the 405. Did they even try to kind of retrade you on rent or anything, or did they just walk immediately?
Yeah, there were discussions, Craig, where we worked to provide them a number of alternatives relative to short-term extensions to address their concern and a few other things, and I think they just simply made the determination that it was in their interest to terminate the lease.
Got you. Just more broadly on the leasing pipeline, that was helpful kind of going through it. Are any of those deals related to the Commerce spaces you guys are going to back to Macquarie Reliance? Can you just give us an update on kind of your thoughts on timing on that now, just given what's going on?
Yeah, no, great question. I'll start off, George, maybe you can pick up. Look, I think we've got a great pipeline on Commerce. Again, the virus has clearly had an impact on what people are focusing on. I actually thought when we did our pipeline assessment, Craig, from a broader standpoint, that more than half of that pipeline still active, is really, we thought, very positive. To be moving towards lease executions in the next call it 90 to 120 days, we think is really encouraging. Certainly, we think with some of these states beginning the process of reopening, particularly Pennsylvania and Austin, Texas, we feel like we're in pretty good shape to have weathered at least the initial blow.
On the Macquarie space, we did sign a 38,000 sq ft lease during the quarter, with the life science company, which we're really excited to bring into our portfolio as an expansion tenant. That was about 25% of the space. We have another 20% of the space in advanced lease negotiations that we feel pretty good about. Then we have proposals outstanding for about another 10% of the space. As we sit today, we feel we're in a very good position on a little more than 50% of that space. Certainly, it's a top priority for our company. I think we're pretty happy with the results thus far and the pipeline. We'll have to spend obviously some time, not just on Macquarie space, but on the rest of the pipeline, making sure that we can convert those to fully executed leases.
George, anything else you wanted to add on that?
Yeah, sure. Thank you. The Reliance space, as you recall, comes back to us 12/31/2020. It's 141,000 sq ft. We've got about 200,000 sq ft of prospects in that pipeline that Jerry detailed in his commentary. Certainly, expect conversations to kind of pick up as things start to come back to some level of normalcy. Again, we've got plans in place for what we need to repurpose that space once we get it back from the tenant. We feel good about the pipeline we have. I think it'll just come down to how quickly some of those companies can make their space need decisions.
That's helpful. Maybe I can slip one more in. Just Jerry, as you guys have discussions with JV partners on development, I know it's early, but just any change in pricing there or how you think those partners may want to kind of price the risk?
Yeah, great question, Craig. I think the big wild card on pricing right now is it seems to be what the cost of debt will be. We haven't really sensed from our discussions with the equity partners on these larger development deals, whether it's at Schuylkill Yards or Baltimore. I think there's still a high level of conviction that these projects will be extremely successful. I think what we're all kind of working through is what we think the cost of debt will be. Those markets clearly are a little bit dislocated. Neither Brandywine nor the partner are prepared to make any concessions on pricing until we see what the underlying cost of debt will be.
I think in a broader sense, we've really been very encouraged with the number of institutional partners, equity sources, private equity firms that have reached out to us proactively to talk to us about some type of venture structure on some existing assets where we think the pricing is very much in line with what we would have expected. Also starting to talk about how you can go more on the offensive side of the equation if we start to see any kind of dislocation in pricing. I think the big hang-up on the investment market right now, whether you call it a cooling off period, or as Barry Sternlicht mentioned, a kind of short-term coma, we've just got to wait for some of these debt markets to unfreeze, and I think that will have an impact on where pricing winds up.
What we're seeing from a rental rate standpoint, again, canvassing all of our team members and outside market experts, is we don't really see that big of an impact on rates. In fact, if anything, we actually think that some of these high-quality existing projects we have will wind up being the recipient of some additional incremental demand as tenants are starting to look at really the quality of the space. Just our ability to upgrade our HVAC systems to MERV-level filters is pretty significant. Some buildings do that. Not every building can. Certainly, airflow, controlling access points, the capacity for separation are all key things. A little bit of a rambling answer, but to answer your question directly, we've not really seen any significant change in pricing.
What we have seen is a significant influx of private equity sources looking to do transactions, obviously subject to what the overall pricing might be in the debt markets.
Great. Thanks, Jerry.
Thank you. Our next question comes from Jason Green from Evercore ISI. Your line is open.
Good morning. On the collections of 95%, is there any level of security deposits within that figure, or is the 95% pure collections similar to the normal course of business?
George, would you like to take that?
Sure. Yeah. That was all cash collection. There was no application of security deposit to cover April rent.
Got it. In your deck, you guys talked about some capital improvements that you're making to assets to position them to reopen. Are you able to provide a total dollar figure and then a per square foot basis, kind of what that spend is?
Yeah, we're actually computing that. The increased filtering is about a 50% premium to existing filters. When you layer that in, it's, I think, a $100,000 increase. The issue there is can your system support the new filtering systems? If they can, it's a fairly straightforward improvement. If they can't, it's a big retrofit. We've been fortunate that we'd always invest a lot of money into our HVAC equipment and our mechanical system, so we're in pretty good shape on that. Jason, that's certainly something we're going to be focused on over the next couple of months. We don't want to really give you a number, we do view it as an opportunity for us to reinforce the high quality of our assets and also to allay whatever derivative concerns our tenants may have about the security and health of their workplace.
George, do you have anything else you want to add to that?
No, I think you covered most of it. The filtering, just a little bit of a small incremental increase. Again, I think, as we assess that cost, there may be some other normal projects that we're able to kind of substitute to stay whole.
Got it. Thank you.
Thank you. Our next question comes from Emmanuel Korchman from Citi. Your line is open.
Hey, good morning, everyone. Jerry or Tom, I guess you guys touched on this a little bit, but in terms of the buyback, was just wondering how you're thinking about using money that was probably more delayed in the CapEx spend on both the in-place expenditures and also the development spend to buy back stock, which feels more like a permanent event. Aren't you just going to need to either raise that money through new equity when the time comes? Do you do want to sort of build out whatever that CapEx spend was going to fund or find other ways of finding that capital?
Well, Manny, Tom and I will tag team it. A lot of the deferred capital spend related to the sequencing of some of the spend on our development projects. Those projects, as I mentioned, are really elective at any point in time, but certainly at this point in time. We were able to save some dollars by deferring one of those starts until we get more visibility on leasing activity. Obviously, 3000 Market turned out to be a great transaction for us. Certainly by deferring early release packages, some site preparatory work, and all those things cost a lot of money, and we deferred those until we're actually ready to start the project.
We had a number of base building projects, but they only aggregated $7 million or $8 million, and we deferred about six of those, because we were able to defer those without creating kind of safety issues or preventive maintenance issues. We'll take a look at that in 2021. Look, as we looked at the share buyback program, number one, we thought we had plenty of liquidity, and I think the numbers support that we have plenty of liquidity, to certainly focus on our near-term growth opportunities.
Given that the pace and tenor of our discussions with a number of institutional investors and private equity firms, we felt that at some point in the near future, again, as I mentioned on the last question about the economy of debt, we have the ability to recycle some capital within the organization to provide additional liquidity to meet some of those forward growth opportunities. I think thirdly, and I guess fundamentally, we did take a look at the trading metrics of our company. Took a look at the cap rate, the price per square foot. I think just really objectively sat back and said at these levels, given what replacement cost is, I think I referenced in the comments, we took a look, since the Great Financial Crisis, what the trading ranges of assets have been.
Even to go back to the great financial crisis, to have cap rates for asset sales well below the trading cap rate for our stock gave us a lot of comfort that we could generate some incremental liquidity by doing spot asset sales and recover that. I think we had a unique circumstance with the sale of the asset, the ability to defer some development spend. That created the liquidity for us to go ahead and do that net $55 million share buyback program.
What was the cap rate on the Malvern sale, Jerry?
I'm sorry. I actually forget what that was. Tom, do you know?
On the in-place, Manny, it was fairly high, upper single digits. We have some roll coming over on that building, which is why it's non-core, and we did the sale. In looking at what I said in the remarks, we lost about $600,000 of income in the first quarter, which would imply a pretty high cap rate. There is some roll coming that was going to roll out. Kind of hard to peg a cap rate, but it was in the upper single digits as we normalize it.
Thanks, guys.
Thank you.
Thank you. Our next question comes from Michael Lewis from SunTrust. Your line is open.
Great. Thank you. How does the IBM renewal impact the plans at Broadmoor? I know this has been a question for a while about whether they would stay or want a new building or move around. Do they still have optionality to get into a new building if one's built there, or is there kind of certainty now?
Hi, Michael. As we laid out in the supplemental package, we can still build around 2.7 million square feet with the existing IBM buildings in place, number one. Number two, the programs we're moving forward with, i.e., the planning for Block A in particular, then the remaining blocks along Burnet, we can do all of those without really impacting existing IBM footprint. The renewal we did with IBM covered every one of the buildings with the exception of the 905 building, which literally sits where we would be taking our Palm Way Boulevard to the back of the site. We continue to work with them on what they want to do with that building. If they would like to stay there on a bridge base, I think we're fine with that because there's other access points to the back of the site.
We certainly have always indicated to them the ability that if they would like to move into a consolidated, larger building like back on Block L at the back of the site towards the train line, we can do about 1.2 million square feet back there in a 30-story building. IBM could consolidate into one building. I think we kind of threaded the needle by having them sign on for the base level of square footage. We'll continue to dialogue on that one building.
I think the key takeaway point is that our current plans for developing kind of the Burnet side of the site are not impacted by IBM being there.
Okay, thanks. On the 95% rent collection in April was good. You mentioned the co-working and retail tenants disproportionately asking for deferrals. Are there any other trends emerging in the portfolio as you're having discussions with tenants in terms of strength or weakness of whether it be by tenant industry or CBD versus suburban or large spaces versus small? Anything notable there?
George, why don't you pick up on that, please?
Sure. Michael, good morning. I think in terms of trend, it's been more kind of the medium-size to smaller-size tenancy within the office mix. I think as Jerry mentioned in his commentary, everybody is really just managing their own cash flow. They're trying to determine where they can kind of shift dollars, and rent obviously is a big piece of that puzzle. I think as we evaluate these on a case-by-case basis, first and foremost, we've got to have a strong belief that the tenant's viable for the long term. We try and get that deferment paid back within 18-24 months with an extension of term at the same time. Hasn't necessarily identified itself as particular to any one industry. I think it just has been more kind of the medium to smaller tenancies.
Any difference between Philly and Austin or no trend there?
I would say the overall volume of requests has been more heavily in Pennsylvania than it has in both D.C. and Austin.
Great. Thank you.
Thank you. Our next question comes from Tayo Okusanya from Mizuho. Your line is open.
Yes. Good morning. Congrats on the pre-lease at 3000 Market. Just curious if you could talk about who that tenant is, and if you can't, just kind of describe overall what kind of life science sector they may be in or their general size. I'm also curious how that makes you feel about potential to really kick off the rest of the life science projects in Schuylkill.
Good morning. We can't disclose who the tenant is. I think they want to do their own kind of announcement. They're a well-known tenant in the Philadelphia area. They are a major corporate credit. They are in the cell and gene therapy business. They do have other presences in University City. We were delighted to really bring them in and focus on them taking that entire building. It was really a bit of an experiment for us because we really did see a tremendous growing demand for life science, particularly cell and gene therapy companies in Philadelphia. One of the challenges we were facing, quite candidly, was that the time to build these bigger buildings we're contemplating put us at risk of losing some of that pipeline.
We were able to move very quickly with our development team of architects and engineers to really vet the viability of converting 3000 to a life science facility. Fortunately, we were able to do it, and do it in a very cost-effective way. Given that project's location as a premier corner in Schuylkill Yards, we had an immediate upsurge of activity for it, and the fact that it could be delivered within nine-12 months. We've really used that as a catalyst to continue building a pipeline. We are looking at the potential of converting a couple other floors of our existing buildings into life science, which it appears we can do in a couple of cases to try and capture again that near-term demand.
It certainly has reinforced, I think, the validity of our position of trying to really expand, and expand fairly dramatically, the life science component of Schuylkill Yards. Certainly, there's been a slowdown in overall activity. I will tell you there's been no slowdown of activity in terms of life science tenants whether they be independent, affiliated with the universities or healthcare systems. I think that location at Schuylkill Yards is really starting to generate a much more pervasive brand in those sectors. We're talking to a couple of incubator companies about setting up an incubation for life science companies at Schuylkill Yards. We really do view that as one of the primary catalysts to start going vertical within Schuylkill Yards.
Last one on that, our Schuylkill Yards West tower, we have made some modifications to that design to be able to accommodate several floors of life science space within the 200,000 square foot office component. Again, more in response to the kind of tremendous increase we've seen in demand coming from that sector. I hope that answers your question.
Yes. That's very helpful. Going vertical on the rest of Schuylkill Yards, is that more focused on landing a key tenant in the building, or is it more focused on getting financing?
Well, a little bit of both. I think on Schuylkill Yards West, that's a 200,000 square foot office component I just referred to. We can do some life science there, and 320 some residential units. We're ready to go on that given the size of the office component and the residential component. There, it's really a matter of getting financing pulled together, and we're actively working on that both from an equity and a debt standpoint. The other building we have programmed, Schuylkill Yards West, which is an 800,000 square foot life science and office product, about a third life science, two thirds office. There, we are looking for an anchor tenant to move that forward. As we've outlined in the past, we are looking at a partner on both of those projects at Schuylkill Yards.
As I mentioned earlier, we're moving forward on the planning for a life science dedicated building within Schuylkill Yards, and that planning process should be completed within the next several quarters. While we're going through that design development process, we'll certainly be marketing that dedicated building to some of the emerging prospects that we're seeing.
Great. Thank you.
Thank you. Our next question comes from John Guinee from Stifel. Your line is open.
Great. Thank you, and thank you team for doing such a great job on the SUP and being the first office name to report. A couple just little nits. First, any change on Northrop Grumman's expected move-out early 2021? Can you give any detail on the 540,000 square foot IBM lease? If it is somewhere in the SUP or in a previously released document, just let me know.
Hi, John. I'll take the first one, and then George, if you don't mind picking up the second one. No change on their plans, John. I think they were planning on moving into an owned facility. I think from our perspective, we have a renovation plan in process. We're also, as we mentioned on the last call, very much focused on whether we spin that asset out via sale or through some type of structured finance joint venture.
We do not believe this crisis or anything related to it will have any impact on them leaving by the end of the year. In fact, I think they've already started to move out of some of the space. George, you want to pick up the IBM deal?
Absolutely. John, on page 14 in the supplemental, we did lay out some of the particulars, but their 540,000 square foot tenancy pushed out five years to March of 2027. We executed that with only a 4% leasing commission for transactional capital and 12.5% mark to market on a cash basis, and almost 23% on a GAAP basis.
Great. Okay. I think you still have a lot more capacity on your share repurchase authorization. Any reason you wouldn't do that? If you already addressed that, let us know.
Well, we do have that capacity out there.
One of the key drivers behind what we did in the first quarter was kind of kept it leverage neutral. We were able to define sources of capital to fund it. Certainly we're very mindful of our balance sheet metrics. As Tom touched on, with the slide of income in Q4 into Q1 and Q2 of 2021, that creates a little bit of an upward pressure on our targeted range from an EBITDA standpoint. John, we're going to be going through the algorithm of figuring out what's the best way to deploy capital, keep core capital capacity strong, keep our balance sheet strong. We stopped at the net 55 because we had full complete confidence in the coverage of that from a liquidity standpoint.
To the extent certainly that some of these potential other sales or joint ventures would proceed, which again, is uncertain, I think we would certainly look at the current stock pricing level as a recipient of some of those proceeds.
Okay. Regarding Schuylkill Yards, it sure looks like a great location for someone who rides the Amtrak all the time. How does it compare with sort of the heart of University City a few blocks to the west? What are the pluses and minuses?
I think the pluses are, number one, it's closer to Center City. Number two, it's closer to the mass transportation nexus, i.e., the third busiest train station in the country. It has riverfront views, John, and it's also very close to Drexel University and University of Pennsylvania.
I think the advantage is, as we assess it further west out by 38th Street where the Science Center is, they have what we're trying to build, which is they have a cluster. They have a bit of a scale there already. It's a quality development, I think additive to the city, and additive in terms of our plans of creating a larger cluster within University City. They've had a bit of a head start on us because they've been at it for about 20 years now, and they've got some life science companies there. I think they're doing thoughtful design. I think they have limited mass transportation access compared to where we are. I think we have comparable amenity bases.
I think it'll be really a very interesting process over the next couple of years as we work collectively, collaboratively, competitively to try and create a, we think, a significant life science cluster in University City section of Philadelphia. Great. Thank you.
Thank you. Our next question comes from Bill Crow from Raymond James. Your line is open.
Thank you. Good morning, Jerry. When you think about the future of office, right, in this post-COVID or hopefully post-COVID world, beyond the signage that I saw in your SUP and the filtration, talk about things like, do you need more elevators as you think about designing new buildings? Do you need more parking because of hesitancy to get back on mass transit? Does that support more suburban construction than urban construction? How do you think about the floor plates in the future? Do we go to more formal offices and away from this collaborative space? It's the first office company to report. I was just curious how you're thinking about that.
Yeah. Good morning, Bill. It's a great question, and we'll share with you what insights we have at this point, okay? We've spent a lot of time on it. In fact, one of the things we did early on is that we went back to five of the top architectural firms that we do business with, including on the next round of our development projects. Asked them to take a complete fresh look at what they think the post-COVID office environment would look like. We got some very interesting feedback on operations, design elements, HVAC, increasing IT infrastructure, the lighting. I think what it really comes down to, we actually felt pretty good coming out of this.
I think we've always approached our developments and any acquisition we make from a standpoint, like our job as an office company is to provide an envelope in which companies conduct their business and deliver very high-quality services to that. We have very efficient floor plates, very few columns, high ceilings, a lot of glass, top-grade systems, high-speed elevators. I think when we looked at it, I guess a couple of things resonated. One is, I guess the overall comment is no one really knows. I think everyone's kind of speculating. I think as we look at it, there's certainly going to be a migration back to more square feet per employee. Now, whether that's done via larger workstations, the market's migrated from 10 by 10 to six by six.
Whether it goes back to 10 by 10 or there's separation between the workstations with vanity panels. There's certainly going to be wider circulation patterns. We think there's going to be more thought given to directional pedestrian flow, employee flow within spaces. Some of the things we've looked at on some of our newer developments already, which is creating as much of a touchless environment as possible. Even in some of our new developments, we're creating small vestibules that provide a vanity relief as opposed to a door going into restrooms. Separating sinks a little bit greater. We've always put high levels of HVAC into our bathrooms, so I think we'll be in good shape on that. Yeah, I think lobby redesigns will take place, Bill. I think they'll be slightly smaller, less of a gathering spot.
One of the things we're really happy with this came back out of this study is there's going to be a huge push for indoor, outdoor space, and that's exactly how we design our buildings. We carry a lot of outdoor space attendant to our buildings. It's that ability to kind of get access to fresh air, including some of our buildings taking a look and repricing based on do we put operable windows in. A lot of it's going to revolve around the tenant experience, and that's why we have spent a fair amount of time on some of these signage markers. I think there could be a need for more elevators. Again, we put pretty high-speed elevators in, so the response time tends to be best of market. We're 1,000, 1,200 feet per minute. We really move in a good direction there.
I think there's going to be more use of voice-activated technology. We use destination elevators in all of our new buildings. There's no reason why we're exploring that being voice-activated versus touch-activated. Certainly, the incorporation of UV lighting, and micro materials that are kind of antimicrobial fabrics within our spaces. There's a lot of, I think, just different thoughts involving there. What we do know with certainty is that, and I know this from talking to a lot of our tenants and great feedback from our managing directors who've talked to a lot of our key tenants. Quality space, great airflow, great security, safe environments are going to be top of mind. I think Brandywine, like a lot of the other public companies, I think we'll be extremely well-positioned to take advantage of that demand.
There's certainly a difference between kind of deferred and destroyed demand. I think we're looking at a lot of this office requirement will be kind of deferred. Tenants will think through how they want their space to lay out. We think we'll go through a period, Bill, where there'll be a number of short-term extensions done as tenants think about how they want to frame out their space requirements, how they want to sequence bringing their employees back to work. Never has the time been more important for us to be great at customer service side of our business and kind of both anticipating and servicing some of those tenants' needs.
Okay.
I hope that answered the core of your question.
Yeah. No, it's a fascinating time. We'll see how it all plays out, but thanks for the information.
Thank you.
Thank you. Our next question comes from Daniel Ismail from Green Street Advisors. Your line is open.
Thank you. Good morning. Just a quick one for me. Jerry, you mentioned rental rates being relatively flat in this environment. Can you clarify whether that's on a net effective basis and maybe discuss what kind of concessions you're doing in this environment? With the understanding that, of course, it's pretty early in the game, but any insight you can share would be helpful.
Yeah, no. I'll share with you the kind of real-time news from the front because this has been a topic of active discussion within our entire leasing and marketing organization. We are actually seeing very little impact on rental rates. We probably see a little bit slower rental rate growth, at least for the next 12 months. We have not seen any big uptick in any concessions. Again, very early to call. As I think I touched on with Bill, we do think there'll be a number of tenants that will shift from longer-term deals right now to shorter-term renewals, which tends to have a much lower level of capital requirement, which frankly drives up net effective rents. We think there'll probably be some pauses on speculative office development. Frankly, we're in markets where there has not been a lot of that anyway.
I think one of the risks that we do see, it'll be interesting to see how it plays out, is that at what levels will landlords who own lower quality buildings be forced to drop their rates and improve their concession packages to get deals done in buildings that may not have the same level of capacity that our buildings, other high quality buildings have. We don't have any doubt that tenants will be migrating to higher quality buildings. The question on that when you're moving from an A to a trophy or from a B to an A, there's always that competitive pressure from a pricing standpoint to decide what the trophy or A quality landlord will accept. We don't really see a big disruption at all.
I think an early warning sign of that really came out a lot of these discussions that tenants who are looking for rent relief had. I think we're really pleased that such a low % of our tenants have asked for any kind of rent relief. As part of those discussions, we talk to them obviously about what they're planning and what they're thinking. I think we've been pretty pleased with the level of response we've gotten back from the vast majority of tenants on their continued use of office space, their concerns about sequencing it, and how we can help them. Topics of conversation have more been safety and security versus economic focus at this point.
That's helpful. Thanks, Jerry.
Thank you. We'll take our final question for a follow-up from Jamie Feldman from Bank of America. Your line is open.
Great. Thank you. Along those same lines, what are tenants saying about work from home longer term? Do they think they'll keep a larger percentage of their workforce under that arrangement or not necessarily?
Yeah. Jamie, again, I'll share with you what we know, which is anecdotal, not definitive. Every tenant that we talk to, what we're hearing is they can't wait to get back to the office. There's a big difference psychologically between having the option to work from home and being forced to work from home. We view that as a real positive. The work from home dynamic has been evolving. I think it's been accelerated with the rapid deployment of technology enabling a large mass of people to work from home. I do think that could have a muting effect on demand drivers going forward. I think from an office landlord standpoint, with this globally 81% of the workforce on kind of mandatory shutdowns, I think we're seeing people really anxious to get back to a collaborative face-to-face or mask-to-mask environment.
I think we're still working through that with some of the larger tenants in terms of how they phase back in. I think as we look at it, there's certainly going to be a higher percentage of people who will be working from home. How that translates into whether they have a desk or a workstation or a private office at their company's location, I think all that remains to be seen. The technology deployment, I think, has been good. I think that's enabled a number of tenants to continue conducting their business. I think most tenants we talk to, it's been a suboptimal outcome, and they're very much looking forward to getting back to the workplace.
Okay. Thank you. As you think about the air quality upgrades, are there certain ages of buildings or styles of buildings that won't be able to do those kinds of upgrades? How should we be thinking about, I know you talked about filters in your supplemental, just generally, I assume air quality is going to be a big theme going forward.
It will be. I think buildings that are larger, that have good physical plants and chiller systems and strong HVAC and mechanical systems, I think would be more suited. I think where you have packaged rooftop units, it's a little bit harder to do some of that stuff. I know, George, if you want to weigh in with any of your perspective on this.
When we kind of assessed the inventory class in Philadelphia, our folks felt that there probably was only about 25% of the stock, most of which is ours, that could accommodate some of these HVAC filter increases. That's kind of why we've been proactive about getting those installed, so that when people do come back we kind of already have that box checked.
Okay. Do you expect that to be like a standard, that level? I guess it can't be if it's only 25% of the stock.
I think what you see is that most of the newer vintage buildings are already designed and built for that. I think where it's a little bit more challenging is on older inventory where you would have to retrofit some of those systems.
Okay. It's doable, it's just expensive.
Correct.
Okay. All right. Thank you.
Yeah. I think, Jamie, just to wrap up on that, I think when we're looking at our new development projects, everything that we've all collectively learned over the last couple of months, all those items are being fully factored into our development pipeline going forward, as I would expect every landlord is doing as well. Thank you for the question.
Ladies and gentlemen, that does conclude our question and answer session for today's conference. I'd now like to turn the call back over to Jerry Sweeney for any closing remarks.
Great. Thank you all for participating. I'm sorry that we ran a little bit longer. You would expect that in these kind of times. We appreciate your engagement. If you have any questions on the supplemental package, please feel free to reach out to us. We'll all get through this together. We're all working together to get through it. From our perspective, please stay safe and healthy, and we look forward to providing a further business plan update to you on our next quarterly call. Thank you very much.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.