Good day. Thank you for standing by. Welcome to the Brandywine Realty Trust First Quarter 2023 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. Instructions will be given at that time. Please be advised that today's call is being recorded. I would like to hand the call over to your speaker today, Jerry Sweeney, President and CEO. Please go ahead.
Michelle, thanks. It's actually Jerry Sweeney, that's quite all right. Good morning, everyone, thank you for participating in our first quarter 2023 earnings call. On today's call with me as usual are George Johnstone, our Executive Vice President of Operations, Dan Palazzo, our Senior 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 today may constitute forward-looking statements within the meaning of the federal securities law. 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.
To start off with our prepared comments, we'll review first quarter results and progress on our 2023 business plan. Tom will then review first quarter financial results and frame out some of the key assumptions driving our 2023 guidance for the balance of the year. After that, Dan, George, Tom, and I are certainly available to answer any questions. The first quarter's gotten the year off to a very solid start. Results are in line with our 2023 business plan. During the quarter, we executed 357,000 sq ft of leases, including 179,000 sq ft of new leasing activity. For the first quarter, we posted rental rate mark-to-market of 14.9% on a GAAP basis and 4.2% on a cash basis.
Our full year mark-to-market range remains at 11%-13% GAAP and 4%-6% cash. As outlined in our 2023 operating plan, we did have 109,000 sq ft of negative absorption for the quarter due to known move-out and early termination activity. While quarterly GAAP same store outperformed and cash same store slightly underperformed our business plan ranges, we're keeping our ranges in place based on leases executed but not yet commenced, as well as some forecasted activity. First quarter capital costs were in line with our business plan, about 8% this first quarter, which is excellent for us. Tenant retention of 45% was slightly below the bottom end of our full year forecast, fully anticipated, so we're maintaining our existing range at our forecasted levels.
Core occupancy and lease targets were in line with our business plan. Spec revenue remains $17 million-$19 million, with $12.8 million or 71% at the midpoint achieved. The speculative revenue range represents approximately 1.1 million sq ft, of which 628,000 sq ft is done, so we're 57% complete on that metric. From an occupancy and leasing standpoint, our Washington, D.C. portfolio continues to underperform. Conversely, our Philadelphia CBD, University City, Pennsylvania suburbs, and Austin portfolios, which cover 94% of our NOI, are 91% occupied and 92% leased. Fundamentally, the operating platform is solid with a stable outlook. We have reduced our forward rollover exposure through 2024 to an average of 6.6% and through 2026 to an average of 7.4%.
We continue to see the quality curve thesis play out as our physical tour volume has been very, very encouraging. First quarter physical tours exceeded our 2022 quarterly average by 40% and also exceeded our pre-pandemic levels by 27%. More tenants are in the market looking for quality space, and we think that portends great things for our portfolio going forward. Additionally, during the first quarter, 126,000 sq ft were a direct result of this flight to quality. Tenant expansions continue to outweigh tenant contractions in the quarter, and we are projecting, as we had in 2022, a positive expansion to contraction ratio. Our total leasing for the quarter is up 23% from last quarter, and our pipeline stands at 3.3 million sq ft.
That pipeline has broken down between 1.3 million sq ft on our existing portfolio, so up about 100,000 feet, and 2 million sq ft on our development projects, which is up 200,000 sq ft from last quarter. The 1.3 million sq ft existing portfolio pipeline includes approximately 138,000 sq ft in advanced stages of lease negotiation. Also for the quarter or the pipeline, about 30% of that new deal pipeline are prospects looking to move up the quality curve. In looking at our EBITDA, our first quarter net debt to EBITDA increased from the fourth quarter, but again, in line with our business plan. As occupancy increases during 2023, we anticipate this ratio will decrease to our business plan range.
As we always note, and specify in our SIP, you know, this ratio is transitionally higher due to development spend and debt attribution from our joint ventures. To further amplify that point, you know, our core EBITDA metric, which is our operating portfolio, excluding joint venture debt attribution and development and redevelopment spend, ended the quarter at 6.4x within our targeted range. With economic uncertainty and rate volatility at top of mind, leasing and liquidity remain our key focal points. As Tom will touch on the liquidity front, since year-end, we made significant progress, raising over $315 million of proceeds. In January, as previously disclosed, we closed a 5-year, $245 million secured financing collateralized by seven wholly owned properties.
This note, while secured, has flexible release provisions and prepayment provisions after March 2025. As we noted in our previous call, we took the secured route solely due to pricing differences between the secured and unsecured market, as we do plan to remain an unsecured investment-grade borrower. During February, we executed a $70 million unsecured term loan to further bolster our liquidity. As a result of these and other financings done late last year, our consolidated debt is 93% fixed at a 5.1% rate, and we have no consolidated debt maturities until our October 2024, $350 million bond. We continue to have full availability on our $600 million unsecured line of credit and approximately $97 million of unrestricted cash on hand.
As noted on page 13 in our SIP, based on development spend projections, business plan execution, after fully funding remaining development spend in dividends, all TI and leasing costs, we project to have full availability on our line of credit at year-end 2023. In terms of the dividend for the quarter, at the guidance midpoint, our $0.76 annual dividend or $0.19 per quarter represented a 66% FFO payout ratio and an 81% CAD payout ratio. We had a great quarter controlling capital spend. To be conservative for now, we are keeping our CAD range in place. Additionally, our business plan projects $100 million-$125 million of sales activity that may generate additional gains.
With liquidity needs, substantially addressed, our sale activity on target, conservative underpinnings to our coverage ratios, we kept the dividend at $0.19 for the first quarter. Certainly, as our business plan progresses, the board will closely monitor capital market conditions, overall liquidity, sale activity progress, and our payout levels as they evaluate the dividend going forward. We also, from an additional liquidity enhancement plan, enter into two construction loans this year, one in our 100% fully leased, 155 King of Prussia Road and our life science project in Schuylkill Yards later this year. On the joint venture front, as disclosed in the SIP, we have two non-recourse loans maturing during 2023. We are well underway with our refinancing efforts for those loans. The first is a $200 million loan on our Commerce Square joint venture.
This is a lower levered financing with over a 12% current debt yield. We have received a short-term extension from the existing lender and anticipate closing the new financing during the second quarter. The second maturity occurs in August of 2023. Again, it's non-recourse in a joint venture that we are a 50% partner in. Refinancing efforts are underway there as well. In looking at our development pipeline, we currently have $1.2 billion under active development. Of that, our wholly owned development pipeline of $302 million is 30% life science and 70% office. This wholly owned development portfolio is 83% leased with a remaining funding requirement of $77 million, which is built into our 2023 capital plan.
Our joint venture development is 31% residential, 41% life science, and 28% office. Brandywine has now fully funded our equity position with $52 million of equity remaining to be funded by our partners. Furthermore, other than fully leased build-to-suit opportunities, as I mentioned on the last call, future development starts are on hold, pending both more leasing to our existing joint venture pipeline and also to the point, more clarity on the cost of debt capital and cap rates. Looking ahead, though, given the mixed-use nature of our master planned communities, primarily at Schuylkill Yards and Uptown ATX, and as identified on page 14 of our SIP, our expected forward pipeline product mix is 21% life science, 36% residential, 27% office, and 16% support retail and other uses.
Over time, and certainly subject to capital market conditions and tenant demand drivers, we do plan to develop that other 3 million sq ft of life science space. Upon that completion, we'll have about 7.5% of our portfolio square footage in life science when the existing projects are completed. Our objective is to grow our life science platform to about 21% of our square footage. Just a quick review of our specific development projects. 2340 Dulles is 92% pre-leased, $33 million of remaining funding is in our capital plan. 250 King of Prussia Road in our Radnor Life Science Center remains 53% leased. We have $28 million of remaining funding.
We have a strong pipeline of over 220,000 sq ft for the remaining space. That pipeline is 100% life science. We are still projecting a stabilization date in Q1 2024. 3025 JFK Blvd, our life science office residential tower, is on time and on budget for delivery in the second half of this year. We have a current active pipeline totaling 625,000 sq ft on that project, which is up 153,000 sq ft from last quarter. That's for the obviously, for the life science and office components. The project continues to see great activity as the construction progresses. Superstructure now complete. Lobby finishes are going in. We've done over 134 hard hat tours.
We also expect to start delivery of the first block of residential units in the second half of this year. All remains on schedule there as well. Our dedicated life science building at Schuylkill Yards, 3151 Market. We have a pre-leasing pipeline of 423,000 sq ft, again, up from last quarter. That project will be delivered in the second quarter of 2024. We have plans underway to obtain a construction loan and a 50% loan to cost range later this year. Our Block A construction at Uptown ATX is also on time and on budget. On the office component, our leasing pipeline is 538,000 sq ft. This pipeline is up from last quarter.
As noted on our last call, with some larger tenants putting their requirements on hold, we're also very much focused on smaller multi-tenant floor prospects. That approach is beginning to bear fruit, as our pipeline now has five prospects in the 30,000-60,000 sq ft range. During the quarter, we also started the next phase of our B+labs expansion at Cira Centre by beginning the conversion of our ninth floor to graduate lab space. That project will be completed in the first quarter of 2024. Total cost is $20 million. The expected yield is about 11%, and we're already at 28% pre-leased. Our 2023 business plan also includes $100 million-$125 million of property dispositions.
We're making good progress in a challenging market earlier than expected, but we still expect the bulk of the sales activity to occur in the second half of the year. We have $200 million-$300 million of assets in the market for price discovery, as I mentioned. Right now, we have $50 million moving through contract negotiations and about $75 million nearing the end of the bid solicitation process with several active bidders. We do continue to plan to sell non-core land parcels during the year.
On our joint venture operating projects, as I noted in the discussion on EBITDA, we have about $470 million of debt, or 18% of our total debt levels coming from our JVs, with about $420 million of that coming from our operating JVs. We have discussions underway and plan to recapitalize several of these joint ventures later in 2023, with the goal to reduce that attributed debt from operating joint ventures by $100 million or 24%. Dollars generated from these liquidity activities will be used to fund our remaining development pipeline, commitments to reduce leverage, and redeploying to higher growth opportunities, including stock and debt buybacks on a leverage-neutral basis. At this point, Tom will now provide an overview of our financial results.
Thank you, Jerry, and good morning. Our first quarter net loss totaled $5.3 million or $0.03 per share, and FFO totaled $50.8 million or $0.29 per diluted share and in line with consensus estimates. Some general observations regarding the first quarter results. While the results were in line with consensus, we had several moving pieces and several variances compared to our fourth quarter call guidance. Our termination and other income totaled $2.4 million and was $400 million above our fourth quarter forecast, primarily due to some one-time income items. Interest expense totaling $23.7 million or $800,000 below our fourth quarter guidance, and that is primarily due to higher capitalized interest.
Our management leasing and development fees totaled $3.4 million and was $900,000 above fourth quarter projections, primarily due to lease commission income. We forecasted land sales to generate $1.5 million of gains. One of those transactions was delayed. However, we anticipate that transaction to occur in the second quarter. Our first quarter debt service and interest coverage ratios were 2.9 and 3.1 respectively, and net debt to GAV was 41.1%. Our first quarter annualized core net debt to EBITDA was 6.4x within our 2023 range, and our annualized combined net debt to EBITDA was 7.4 and $0.01 of a turn above our guidance range of 7 to 7.3.
As far as portfolio changes, we anticipate that we will bring 405 Colorado into the core portfolio in the second quarter as it stabilizes. On the financing side, as Jerry outlined, we continue to make progress on the financing front. In addition to the previously announced transactions, we closed on a $70 million term loan that matures in 24 months, including an extension option. The execution of the term loan provided some additional liquidity to ensure that the $600 million line of credit remains undrawn while the development and redevelopment project commence operations and begin to provide us incremental cash and a lot. While we were successful in obtaining this financing, we continue to see challenges within the financing market.
you know, in the traditional banks, we are allocating, we see them allocating, you know, very little to new originations, in the new office loan market, except for certain situations such as fully leased, build-to-suit properties. We think some lenders tend to be flexible and will provide loan extensions on performing portfolios. With the Silicon Valley Bank and Signature Bank concerns, the CMBS market has been very slow. However, activity has picked up and transactions are focused on lower level loan to value office assets. life companies have also been selective in underwriting new loans, with a focus on lower loan to value and a preference for longer weighted average lease terms.
Regarding our choice venture debt, we currently are working on our 2023 maturities, including an active completion of our Commerce Square loan, which will occur, we expect to close later this quarter. We are also working with our partners on the 2024 maturities to possibly extend the current maturity dates with our existing lenders, while also considering some asset sales to lower leverage. For 2023 guidance, you know, our general assumptions for the business plan is the property sales, as Jerry mentioned, scheduled to occur in the second half of the year with minimal dilution this year. No property acquisitions, no anticipated ATM or share buyback activity, the share count will approximate 174 million diluted shares. Looking more closely at the second quarter, we have the following general assumptions.
Our property level operating income should total about $76 million and will be $3.4 million ahead of the first quarter, primarily due to the occupancy in gains at 405 Colorado, 250 King of Prussia, and the balance from the portfolio. FFO contribution from our unconsolidated joint ventures will total $3.3 million for the second quarter. The sequential decrease is primarily due to the forecasted higher interest expense, primarily due to the anticipated refinancing at Commerce Square. G&A for the second quarter will be $9 million, slightly below the first quarter. Total interest expense will approximate $24.7 million, and capitalized interest will approximate $3.5 million.
Termination and other fee income will total $500,000 , a $1,500,000 decrease from the first quarter, primarily due to several first quarter one-time items that we had highlighted, you know, on the last call. Net management fee and leasing development for the quarter will be $2.5 million. This sequential $1 million decrease is primarily due to lower leasing commission volume. Our land sale gains and tax provision will net at $500,000 . Looking at our capital plan, we experienced a better-than-forecasted CAD Payout Ratio of 81%, primarily due to leasing capital costs being below our business plan range. While we experienced some first quarter movement that was lower, our annual 2023 CAD range remains at 95%-105%.
Our capital plan is very straightforward for the balance of the year. It's comprised of $130 million of development and redevelopment, $99 million of common dividends at the current rate, $22 million of revenue maintained capital, $40 million of revenue create capital, and $19 million of equity contributions to our joint ventures. The primary sources will be $148 million of cash flow after interest payments, $42 million use of current cash on hand, and $120 million of land and property sales. Note that we have no capital based on the capital plan outlined above, we project having full line availability by year-end. We also project that our net debt to EBITDA will be in the range of 7-7.3, with an increase primarily due to the incremental capital spend on our development projects.
Our debt to GAV will be in the range of 40-42. Our core net debt, EBITDA of 6.2-6.5 at the end of the year excludes our joint ventures and our active development projects. We continue to believe this core metric better reflects the leverage of our core portfolio and eliminates our more highly leveraged joint ventures and our unstabilized development and redevelopment projects. We believe these projects are elevated on a growing development pipeline, and we believe once these developments are stabilized, our leverage will decrease back towards our core leverage ratio. We anticipate our fixed charge and interest coverage ratios will approximate 2.7 for the year, which represents a sequential decrease, but that's primarily due to higher interest rates. With that, I'll turn it back over to Jerry.
Great. Thank you, Tom. key takeaways. Our portfolio is in solid shape, clearly facing some headwinds in the office market, but pipeline activity is up significantly and advancing through our various stages of leasing efforts at a nice pace. The portfolio is also in a very stable position, with an average rollover, as I mentioned, through 2026 of only 7.4%. We continue our long-standing track record of posting strong mark-to-markets, managing our capital spend very well. as I mentioned, you know, some accelerating leasing velocity, both in the operating portfolio and the development pipeline as well.
You know, since last quarter, we've made significant progress on our wholly owned near-term liquidity needs, put ourselves in a very strong liquidity position with zero draw on our line of credit and $90-some million of cash on the balance sheet. Increasingly solid visibility of executing our 2023 business plan that will improve liquidity and keep our operating portfolio in a very strong footing. As usual, and where we started, in that we wish all of you and your families well. At this point, Michelle, we're delighted to open up the floor for questions. We always ask that in the interest of time, you limit yourself to one question and a follow-up. Thank you.
Thank you. If you'd like to ask a question, please press star one one. If your question has been answered and you'd like to remove yourself from the queue, please press star one one again. Our first question comes from Anthony Paolone with JP Morgan. Your line is open.
Great, thank you. I guess, Jerry, my first question relates to just looking at occupancy going forward. I mean, you gave some pretty good stats on expansions versus contractions and the growth in the pipeline. Just trying to see how you bridge that sort of situation with the sentiment that, you know, for the next one to two years or whatever it may be, office cash flows are likely to decline? you know, quite a bit, or at least that seems to be the indication from either the stocks or just, you know, I think most people's thinking out there.
Hey. Hi, Tony. Yeah, George and I will tag team this. I mean, look, there's no question that, you know, conventional thinking is that there's going to be some significant headwinds. In fact, some days I wake up, I think the headwinds are so strong, it's blowing the hair off my head. You know, no question office is going through, you know, a shift driven by increased employee mobility, shift in space preferences, and there will be winners and losers. We definitely expect, you know, more selective demand drivers over the next couple years. We continue to believe that tenant focus will be on quality driven by superstructure, presentation of the building, its location, amenities.
Increasingly, we're seeing more and more that landlord quality and reputation, their ability to fund improvements and their stability in terms of long-term ownership are increasingly up the priority checklist for a lot of our tenants. Even with the secular shifts, which seem to be there, and the demand muting effect of, I guess, a slowing economy, we still believe we'll be in very good position to perform well. You know, I guess when you take a look at it, there's a lot of information out there on the office sector. A lot of brokerage firms have good reports out there on the state of the office market.
I guess as we look at it, a recent report was identifying, you know, the total office inventory in the United States being about 6 billion sq ft. You know, about 15% of that being top quality, garnering premium rents, about 24% or 1.3 billion kind of being middle, top middle, very good in from a competitive standpoint, about 15% kind of attractive to cost-conscious consumers. You know, the balance being needs upgrades, repositioning, or functionally obsolete. We believe all of our inventory is in the top two tiers. It's gonna garner premium rents, or it's, it's good enough to compete given the location, the investment we made.
We also think not much is gonna be built unless driven by specific demand drivers, so that over the cycle, that'll improve the competitive position of our existing inventory. The high-quality inventory, we think, even with the secular headwinds, their competitive position gets stronger due to supply, demand, and balance. I think statistically, you're starting to see that with even some of the rent disparities between the A and the B space. Look, we continue to forecast good cash mark-to-market, portfolio occupancy and leasing stability.
We have excellent control on our capital costs. Even some of the macro statistics out there nationally, which we're certainly seeing in our own portfolio, is, you know, rent premiums on leases greater than seven years has doubled over the last two years from 16.4% to 35% in Class A inventory. Even the suburbs, new assets, are performing better than older assets with rent premiums close to 50%. When you take a look at CBD new assets over the last couple years, you know, rents are up 3.6%, while in the Class A trophy class, where they're down 10% in the Class B. You know, newer assets in the suburbs, rents on average are up about 6.8% and down about 3% in the older quality inventory.
We do think that the office sector is going through a shift, very similar to what we saw in some of the other product types. You know, a number of years ago, an 18-foot clear warehouse was state-of-the-art. It's no longer state-of-the-art. We certainly think that in the office sector, there'll be some significant accelerated obsolescence that will have a muting effect on overall demand, but also for the well-positioned portfolios, put them in a higher capture rate of bringing in tenants. It seems to be statistically that tenants will continue to pay higher rents to be in a higher quality workplace. Certainly seeing a much more pronounced return to office trend across our portfolio. There's been some national news on some of the major corporations bringing people back to work.
We continue to see very minimal hoteling or hot desking throughout the portfolio. Look, there's no question conventional thinking is that office is really back on its heels, and we're positioning the company to deal with that dynamic. We've increased our marketing campaign. We've increased our investment in some of our existing assets. I think the evidence of that is beginning to bear fruit through some of the increase that we've seen in our pipeline just in the last couple months. That pipeline, again, is advancing through, you know, past touring into response to RFPs, to paper being exchanged. We're fully cognizant of the fact that it's a challenging macro environment, and we have work to do.
We also think that the portfolio repositioning that we've done over the last dozen years has really put the company in a very strong position to weather the storm, achieve our business plan objectives, which are conservatively pulled together, and use that foundational platform to spring into higher growth as market conditions improve. I don't know, George, if you have anything to add to that.
I mean, great commentary. I think a couple of things I would, you know, we're outperforming in just about every sub-market in Philadelphia and the Pennsylvania suburbs in terms of, you know, our overall occupancy as compared to the market. You know, even in downtown Philadelphia, including our joint venture holdings at Commerce Square, I mean, we've got about a 6.6% vacancy factor, you know, in a market that's, you know, between 15% and 20%, depending on the brokerage research house. Good levels of outperformance there. I do think the portfolio is situated well to accommodate the trend of people moving up the quality curve.
In terms of our own business plan, you know, we have a path to get us to our occupancy guidance range. But keep in mind the note that Jerry mentioned in his prepared commentary. You know, the small amount of holdings we still have in Northern Virginia and in Wilmington, Delaware, are impacting our overall company occupancy by about 170 basis points. So at 92%, you know, leased portfolio of basically Philadelphia, the Pennsylvania suburbs, and Austin, Texas, at 92%, I think really is the, is the headline.
Great. Thanks for all that. I guess just my other question relates more to life sciences. Wondering with B+labs if you're at a point where any of those tenants, you know, are converting into prospective tenants into your Schuylkill Yards developments at this point, or if it's just too early, or just any other broader comments on the life science component of leasing?
Yeah, Tony, good question. And we do. We think that there's a number of tenants who are currently occupy space at B+labs that remain interested in looking at 3025 and 3151. Frankly, one of the dynamics driving the conversion of the ninth floor was that some of those tenants had an immediate need for additional growth capacity, but weren't quite at a financial stage where we would underwrite them as a credit tenant in new, in a new building. We're being very careful how we do our underwriting on the life science front. As we've talked about on previous calls, you know, we have an operating partnership agreement with the PA Biotech Council, which has been around for a couple decades as a scientific advisory board.
They're very much part and parcel of helping us assess the financial viability of some of these life science tenants. I think the success of B+labs and its continued full occupancy and the high return on costs that we're getting, certainly is emblematic of the growth track record that we see taking place, as we move forward with the deliveries of the buildings at Schuylkill Yards.
Got it. Thank you.
Thank you, Tony.
Thank you. Our next question comes from Nick Joseph with Citigroup. Your line is open.
Great. Thank you very much. Jerry, you mentioned making progress on the dispositions. I was just wondering if you could provide some more color on the process thus far, kind of the size and composition of the bidder pool, any pricing indications, any additional comments you have there?
Yeah, sure Nick, how are you? Yeah, we put a number of properties in the market for discovery, which is at $200 million-$300 million dollar range. Some in, you know, Pennsylvania, CBD, Philadelphia, Northern Virginia, as well as in Austin, Texas. While we're still getting visibility, I mean, the, you know, deal pipeline, or I should say the timing of getting bids has been, as we would expect, fairly protracted. As of right now, we have one building that the buyer is an investment group and a tenant. We have that moving through contract negotiations that's in a $50 million dollar range. We think that transaction will get across the finish line in the first half of the year.
We are evaluating bids from about three different prospects on a suburban Philadelphia complex that we'll kind of reach a conclusion on that in the next several weeks. It seems that, you know, somewhere around $100 million right now, we feel are pretty getting to the level of the advanced. Certainly $50 million is pretty advanced at this point. That's a pleasant surprise to us because we really weren't really forecasting much to happen until the second half of the year. This first foray of properties in the market, as we outlined on the last call, was really just to kind of test the appetite and see what's out there.
Feedback has been, while it's been slow to come in in a number of fronts, certainly I think we're pretty happy with the progress we're making so far. We have a couple of other properties in Northern Virginia that we're waiting for some feedback on some potential bidders. That process is moving a bit slower in all candor, primarily driven by that market really has not performed that well anyway. You add layer in the financing market challenges, that seems to be moving, as we would have expected, a little bit slower, but at least we're gaining visibility on how to deal with that dynamic later in the year.
Thanks. That's very helpful. maybe just on the financing market, I know you walked through kind of the lower loan to values, what's happening on the CMBS side as well. just can you touch on the current pricing difference that you see right now between secured and unsecured debt?
Hi Nick, this is Tom. I think on the for us right now, I think it's the secured debt will be inside of the unsecured debt. Hard to say where that is. As I mentioned, the CMBS market's been opening up since having some slowdown from the banks that were closing. I still think it's at least, yeah, it's at least 100 to 200 basis points. We'll see how we come out on pricing with some of the transactions we're looking at right now.
Yeah. I think just to add on to that, you know, the unsecured market really is kind of the bank market and the public bond market.
Yeah.
I think, you know, the unsecured bank market, while it's certainly, more constrained than it was, I think given relationship lending, you know, I think the team did a great job getting that $70 million unsecured financing across the finish line. The public bond market right now is gapped out to be much, much wider in terms of spreads versus banks. We'll see how that plays out over the next couple of quarters.
Thank you very much.
You're welcome.
Thank you. Our next question comes from Michael Lewis with Truist. Your line is open.
Great. Thank you. Jerry, in the first question, the first question that Tony asked, you kind of combated some investor perceptions. I think another investor perception is that office buildings are not financeable, and you talked about the financing market a little bit, but I think your JV maturities are instructive. You know, you mentioned you have four in the next 12 months. Commerce Square sounds like it's below LTV and close to getting done. MAP Venture is 78% occupied, Rockpoint 68% occupied. Of course, Cira Square is full. You know, you mentioned kind of, you know, possible extensions, some will get refinanced. I mean, I guess my question here is kind of specific to you and then more broadly. I mean, do you think we'll see a lot of loan extensions?
You remember during the GFC that, you know, everything was lend and extend. Do you think we'll see a lot of defaults that put pressure on values? You have some of that in your portfolio, and I think it's applicable to the rest of the universe. Do you have any thoughts on that?
Hey, Michael. A great question. I think as we're approaching all of these, you know, joint venture refinancing discussions, you know, we're talking to each of the lenders who we have great relationships with about the, you know, the dilemma that the portfolio is facing. None of the dilemma the portfolio is facing is lack of performance effort by Brandywine and our operating partners. It tends to be more of a macro concern. We can certainly articulate to those lenders exactly where every dollar, where every lease has gone over the term of their loan. To some degree, those banks, Michael, will drive what the ultimate outcome will be, whether they do a short-term extension and reset the rates and the value proposition is supported by appraisals.
That's kind of track one. Whether they wind up doing A/B note structure, providing a window of opportunity for a borrower like our joint venture partners in Brandywine to invest additional capital and get that return as a priority over the B note. I think that will be a likely outcome in a number of situations. I do think, and I'm not sure they're applicable any of our ventures, but I do think there'll be situations where the borrower and the lender will simply agree that the best solution from the bank's perspective is to take the property back. you know, the borrowers may not be of a mindset to invest additional capital given the quality of the portfolio that's encumbered, unless there's an easy mechanism. Or I should say, easy.
Unless there's clarity that the additional incremental money the borrower invests can be recovered as a priority of the over-leveraged situation. I think a lot of it depends upon the approach that the banks take. That will certainly determine what structures they work through with the borrowers. You know, I'll tell you from our standpoint, we have great joint venture partners. Between our partners and Brandywine, we have extensive relationships. We've always operated on a very forthright, transparent basis. I think all of our lenders view us as a really high-quality landlord. You know, hey, if it wasn't for the work you guys are doing, the portfolio might not be performing as well as it is. We think there's a mutuality of interest between borrower and lender to reach the right economic program.
Again, that has to work for both parties. We're going to each of these discussions, being constructive and positive and wanna work through the right result. All of these mortgages, of course, as you know, Michael, are non-recourse. Brandywine either has a, you know, negative, a capital account we have, we've made plenty of profit in the property or marginal, marginally, marginal investment levels. We'll make the right business decision, both economically and reputationally for the company. You know, to some degree, that decision, as I mentioned, is gonna be driven by what the perspective is of the banks. Certainly, you know, banks recognize that there's a general credit crunch on commercial real estate, and that the issue is systemic, not specific.
How they deal with that will be, you know, within their own investment committees. Our approach is to, you know, get these loans extended, get them restructured, create a capital structure that provides an opportunity for both the borrower and the lender to win, and we'll see how that works its way through the process.
Michael, this is Tom. I think also, I think if we see interest rates kind of hit a peak, I think that some of our... Talking to some of the banks, they feel maybe if they've hit a peak stress level of where the rates are, that may also, again, this is more for the loans in 2024, may give us, you know, an opportunity to see that sort of normalize. Then they have a little more clarity where they may see interest rates going, and that can help in the decision-making process as we talk to the lenders as well.
Yeah, that makes sense. Those yield curves look like they might start to help a little bit rather than hurt pretty soon. My second question is about the dividend. You last reduced the dividend in 2009. I checked your website and elsewhere. I think that's the only time you've ever lowered the dividend in the company's history. I apologize if it makes you feel old, but we looked back, I think, 30 years, and we only found that one cut. I bring this up because I've argued that there's, you know, there might not be a reason to pay an 18% dividend yield for very long. Maybe I'm wrong.
If Brandywine's gonna be known as a company that, you know, as long as the dividend is covered, is gonna pay it makes that yield that apparently nobody thinks is gonna stick around, look more attractive. I guess my question is, you know, is your view that as long as the dividend is covered by cash flow, you'll continue to pay it, or do you look at it as, you know, that high dividend yield isn't doing you any favors, and you could, you know, retain that capital anyway? You know, how do you kinda think about balancing those things?
Yeah. Michael, very fair question. Look, we continue to reflect on how our business plan is progressing and how that relates to existing dividend levels. I think, and maybe I'll level set the discussion. You know, before the impact of any of our sales, you know, we think our taxable income is kind of in the $0.55-$0.60 per share range. So the savings would be, you know, kind of $27 million to low $30 million range annually. We also think some of the sales could have taxable gains. Maybe might be some taxable losses, too. We're waiting to get some more clarity on sales of what we'll sell and what gains and losses that we'll have.
you know, we do have a strong baseline, and I think conservatively constructed operating plan for 2023. And we may very well see some improvement in our capital ratios as we've typically seen. Like for example, last year, you know, our opening range was a CAD average of 84%-95%, and we wound up at 84%. Even in the first quarter, we came in at 81%. It is a challenge, particularly in this type of landscape because I think, to answer your question directly, you know, I think the board will be of the mindset, so long as the dividend is covered, we wanna continue paying that dividend. The variable to that, which is well beyond our control, is what happens in the capital market conditions.
You know, we wanna be very disciplined and very mindful of forward liquidity and how we generate additional liquidity to both delever the balance sheet, preserve good credit metrics, and keep the business plan moving forward. You know, philosophically, the answer to your question is yes. Pragmatically, we've got to keep our eye on the bigger picture of things that we can't necessarily control. I think the other way we look at it honestly is, you know, we wanna keep in mind that, you know, despite the irrationally low stock price us and other office companies are having, you know, the average investment base of our shareholders is in the low double digits. The return to them at the current dividend level, you know, is in the 6%-8% range.
Even though spot pricing is much higher, it's actually in a very reasonable range given the investment base of our shareholders who are counting on us to both have the forward focus on addressing liquidity, have the financial discipline to inculcate the right results, and to generate additional external liquidity through sales to make sure that we keep the dividend fully covered. We work for our shareholders and our office shareholders, not just Brandywine, but all office shareholders, have been really adversely impacted due to the, you know, macro negativity and the tone of what's happening to office, what's happening to the credit markets, what's happening to the economy.
I think we do, when I say we, management and the board, feel an obligation to continue keeping our business plan moving forward to try and return as much value as we can to our owners during this very challenging period of time. I don't know if that answers your question or not, but I think that's how we kind of assess where we are.
No, it does. That's helpful. Thank you.
Thank you. Our next question comes from Tayo Okusanya with Credit Suisse. Your line is open.
Hello?
Hello. Can you hear me?
We can hear you, Tayo.
Can you hear me?
How are you?
Oh, perfect. Hi. How are you? Quick question just about lease up of the a lot of the JV development projects. Again, you talk a lot about kind of active pipeline. The leasing pipelines actually look like they're expanding. Can you just kind of talk about the kind of final conversion and when we can kind of expect to actually start to see some actual signed leases for some of those assets?
You kind of have a little bit, but I think the question is kind of how we move through from the pipeline to lease execution.
Yeah.
Look, I think, you know, the probability of a lease execution is a direct relation to the amount of pipeline we have. I think while we are in it, we wish we had definitive leasing to present back to you and our shareholders, and we're working on that, and I'll get to that in a second. you know, I think generally the team is very pleased with the increased levels of activity. Part of that is the flight to quality construct. Part of that is, I think, the tremendously talented leasing teams we have working on these projects in terms of generating new activity. I think part of it is also these buildings are finally getting to the point where people can walk through them.
You know, typically, as we've looked at these cycles in the past, if you don't have a pre-lease in place by the time you start, most of the significant leasing activities occurs as the building nears completion and kind of six months after it's completed. 'Cause tenants, unless it's a pre-lease again, they really do wanna see what the lobby looks like, the security desk, the turnstiles, the elevator cabs, the window lines, all those things that are important to them in creating the value proposition in their minds to lease at a, at a rental rate that's higher than general market, given its new construction. I think from that standpoint, the progression that we've seen through the pipeline in our Schuylkill Yards projects, has been very, very encouraging. Again, I mentioned, you know, 134 hard hat tours.
The pipeline has grown significantly. What we do is once we get a prospect in, we do everything we can, including meeting with their top C-level executives, dealing with their broker, providing them, we have great virtual tours of all of our properties. Some of our senior executives, including Tom and myself, reaching out to their top executives to get them enamored with doing a transaction, becoming a member of the Brandywine family of tenants. We have very, very good in-house space planning people that can turn a space plan within two days. Some very strong internal construction folks that can price out a plan much faster than a lot of our competition.
All the things that we can do to control the process to get them to a lease execution, I think we're doing everything we can. In today's climate, tenants are just particularly the larger sized tenants we're talking to, are simply slower to pull the trigger on making a long-term, large capital commitment for their organizations. To some degree, some of these companies are waiting for more visibility on how they view their business plan evolving over the next several years before they pull the trigger. I don't know if that answers your question. It's a hard process because it's not like we can push a button and make a donut.
We've got to get people across the finish line, by giving them every element of their decision making process as quickly as we can so they have the full range of information to make their decision. You know, the flip side is that, you know, even on the life science market in Philadelphia, you know, if you looked at that under construction or pre-development pipeline a year ago, the actual properties under construction for delivery in 2023 and 2024 is much lower than it was when we looked at it back in 2021 and 2022. The universe of competitive product is lower, and the tenants in the market has remained about the same level.
Some of those tenants in the market have put their requirements on hold until they clear FDA approval, they get their financing lined up. All the natural reasons they would make that decision. For the most part, the supply-demand balance on these projects seems pretty favorable to us in getting some of these prospects across the finish line and getting leases executed.
That's helpful. Just follow up, Tom, in regards to the dividend, again, massive dividend yield today, relative to your peers, and then, you know, guidance suggests, you know, an FAD payout close to 100%. I mean, how does one kind of think about the dividend going? Like, what exactly is the board going to really consider to think about what the appropriate dividend level is going forward?
Yeah, I think the board will focus on a couple of very key data points. One is, how is the business plan progressing from an operating standpoint, and what visibility do we have on achieving our business plan? Number two, how is the financing and sales campaign going in terms of addressing both current and forward liquidity requirements? 3, take a look at what their view is of overall capital market conditions as we start to think ahead to 2024 and 2025 on financing needs. Again, one of those, the first one is fairly controllable from our management team.
The second one, the proof will be in the pudding in terms of what we can deliver in terms of financing some of these joint ventures and getting some sale proceeds across the finish line. The third is a macro question that certainly, management and the board will evaluate as we think about what the risk management position should be for the company.
Thank you very much.
You're welcome.
Thank you. Our next question comes from Dylan Burzinski with Green Street. Your line is open.
Good morning, guys. Thanks for taking the question.
Good morning, Dylan.
You mentioned reducing leverage as a possible use of capital should you get some of these dispositions to the finish line. Just curious, you know, how you guys are thinking about those leverage targets that you had in the 2023 business plan. On a longer-term time horizon, is there any desire to sort of lower those?
Oh, yeah, I think, I mean, yeah, our game plan is to get our leverage targets, our overall company leverage kind of in the range of where our core net debt to EBITDA number is in the low sixes. Certainly as we look at it longer term, particularly some of these developments coming online and hopefully, some recovery in the office market, you know, we continue to target getting below 6x over the course of the next several years. You know, certainly one of the immediate tools that we're working on, Dylan, is, as I alluded to and Tom touched on, was, you know, exiting some of these joint ventures. They tend to be more highly levered.
The debt attribution of over $400 million, you know, by reducing that is a very powerful de-leveraging tool we have at our disposal. Some of those joint ventures are coming to the end of their natural life cycle with us. Our ownership ranges from, you know, 15%-50%. We're evaluating each and every one of those joint ventures that we have identified in the supplemental package as how they can become candidates for us to exit or reduce our ownership stake over the next several years as a, as a way for us to accelerate the de-leveraging even in a capital-constrained marketplace.
That's helpful. Thanks. Just staying on the dispositions. I think last quarter you had mentioned that you're targeting cap rates anywhere from the high sixes to low nines, obviously depending on market. Just given that you're already in the market with several $100 million worth of assets, is that pricing guidance still relatively in line with expectations today?
Yeah, I think so. I mean, you know, the one project we're moving forward with is, as I mentioned on the sales, you know, is a sub-7% cap rate, which is kind of where we thought it might be. The other one is kind of in the 9% range, but it's 9% based upon, you know, kind of leases in place, not necessarily reflecting what we think might roll out of the portfolio. We do think that pricing levels are consistent with what our expectation was. Look, I was frankly hoping for better pricing across the board, but it's not there today.
The reality is that, you know, the pricing levels that we are getting clarity on are very much in line with what we view to be the net present value to us of holding those assets. And as long as that connection point is made between offer price and internal NPV, I think we view that as a tradable asset for us.
Great. Thanks for the color on that. Appreciate it. Have a good one.
Thanks.
Thank you. Our next question comes from Steve Sakwa with Evercore ISI. Your line is open.
Yeah, thanks. Jerry, I just wanted to know if you could provide a little more color on the Austin leasing pipeline for the office building. I'm just trying to think through, like, the timing of those leases to the extent that they get executed. The reason I'm asking is, you know, at some point, these projects are gonna deliver. You can only capitalize interest for so long before, you know, you have to start recognizing the income and maybe putting further pressure on the payout ratio or coverage ratio, which then kind of speaks to the dividend.
Just trying to sort of get a sense for the timing and the size of some of these tenants and, you know, when a lease realistically could get signed and how that might affect the yield, the timing, the CAD ratio as we think about 2024?
Yeah, a great question, Steve. Look, it's certainly a point that we are very crisply focused on. You know, the pipeline, if we're projecting, you know, that we'll start to generate some revenue out of Uptown ATX in the second half of 2024. That obviously is gonna be conditioned upon getting some of these prospects across the finish line. You know, the projects deliver in the second half of this year, so we'll essentially have about 12 months of capitalized interest to make sure that we insulate ourselves from that downside risk. That will clearly be a pressure point and a point of consideration as we look at our revenue numbers going forward.
As you know, I mean, Austin is, while it has great long-term growth potential, in fact, you know, even as of today with the marketplace being slow, there's, you know, 64 new prospects looking at the Austin marketplace, as either a regional or a headquarters relocation. There's about 14 new tenants to the market that are over 50,000 sq ft and about seven over 100,000 sq ft. The forward pipeline looks good. We're just kind of all meandering our way through, you know, what's been a major pullback by some of the tech companies, the increase in some sublease space.
Our team is very much focused on, you know, how we can get some of these smaller tenants across the finish line rather than waiting for one of the larger tenants to make a decision on what they wanna do. I don't know if that answers your question totally quantitatively, but I think thematically that's the direction we're moving in.
Jerry, I guess just maybe not to beat a dead horse here, on the pipeline, are they mostly existing, I guess, Austin tenants that kind of have natural lease expirations and they need to make a decision, or are these more kind of new to market tenants where maybe they don't have to make a decision? Just trying to get a sense for the ability to get things over the finish line versus things to continue to get delayed.
I mean, look, of those prospects I mentioned, they're kind of the 30,000-60,000 sq ft. They're all existing tenants in the market with lease expirations that kind of roll into that timeline I mentioned.
Great. I guess just looking at the change in occupancy, I think there was definitely more weakness in kind of Radnor or Conshohocken this quarter, just sequentially, in terms of the occupancy declines. Anything specific there to note in, I guess, potential backfill opportunities on some of those?
George?
Sure. Steve, good morning. Yeah, it was really excuse me, more, Plymouth Meeting, where we had two kind of 20,000 sq ft tenants vacate. In Radnor, we did get one 12,000 sq ft space back that we've already got two proposals issued to. The Radnor inventory is in great shape and not really of a concern when we get one back. Yeah, to your point, we had some additional move-outs in Conshohocken. 18,000 square footer was the largest, and we've already got pipeline looking at that space.
Great. Thank you.
Thank you, Steve.
Thank you. There are no further questions. I'd like to turn the call back over to Jerry Sweeney for closing remarks.
The only closing remark is, thank you all very much for participating in our earnings call. We look forward to updating you on our 2023 business plan progression on our on our next earnings call. Thank you very much.
Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.