Brandywine Realty selling 5 California properties

Brandywine Realty Trust, of Radnor, says it has agreed to sell most of its Northern California properties to CIM Group Inc., Los Angeles, for $270 million in cash up front, plus $40 million in 2010.

Brandywine will use the money from the sale of five buildings in Oakland, Calif., totaling 1.7 million square feet, for "general corporate purposes" and to pay down debt, chief executive officer Gerald H. Sweeney said.

Brandywine, a major office landlord in the suburbs of Philadelphia, expanded into the West and South during the commercial real estate boom of the mid-2000s, but has recently focused on selling office buildings in slow-growth markets.

"As we assessed Oakland, it felt more toward the lower-growth, higher-capital-consuming curve. It's a good market, but we viewed it as one of the markets we'd like to exit," Sweeney said today in an interview.

Buyer CIM had no comment, spokesman Bill Mendel said.

Brandywine shares closed down 14 cents today, or 0.88 percent, at $15.76 on the New York Stock Exchange.

The stock's closing price hit a seven-year low of $15.70 in January, as the real estate market slowed. Brandywine has lost more than half its stock market value since the beginning of 2007, compared with a one-third drop for Liberty Property Trust, of Philadelphia.

As part of the Oakland deal, CIM will also take over $96 million in mortgage loans on the properties, by Aug. 31. Brandywine agreed to manage the properties for another year.

The Oakland buildings include four office buildings that have a combined occupancy rate of 89 percent, plus 2100 Franklin St., a vacant building that Brandywine had built as a speculative venture.

Brandywine is taking a noncash impairment charge of $7 million, or 8 cents a share, as a result of the deal.

Lazard Frères & Co. L.L.C. acted as financial adviser to Brandywine, and real estate broker CB Richard Ellis Group Inc. helped sell the properties.

The sale leaves Brandywine with about 550,000 square feet of offices in Northern California, plus two future development sites.

Besides selling properties in Oakland, upstate Pennsylvania, Horsham and other slow-growth markets, Brandywine is also negotiating the sale of equity in Cira Centre and in its planned Cira South development.

Brandywine and its investment bankers at Lazard have been talking to investors in Germany and to U.S. firms about buying into Cira, Sweeney said.

"We're not far enough along with any one party" to make any announcements, he added.

Brandywine needs to land new tenants before it starts new construction at Cira. Sweeney has been negotiating with BlackRock Inc., and legislation that would give state and city tax breaks on the site advanced in Harrisburg today.

"We've done a lot of work with BlackRock," Sweeney said. "It shows a really good commitment by the political leadership of Pennsylvania that they're willing to go toe to toe with New York, New Jersey and Connecticut in competing for this."