브랜디와인 리얼티 트러스트(BDN) 2026년 3분기 실적 발표 콘퍼런스 콜: 6억 8,100만 달러 매출로 부채 감축 견인

핵심 요약

• 브랜디와인 리얼티 트러스트(Brandywine Realty Trust)는 2026년 3분기 핵심 FFO(Core FFO)가 2,460만 달러(희석 주당 0.14달러)를 기록했다고 발표했습니다. 반면 순손실은 2,230만 달러(주당 0.13달러)였습니다.
• 회사는 2026년 자산 매각 목표를 6억 8,100만 달러로 상향 조정했으며 해당 프로그램 달성 및 자금 조달이 완료되었다고 밝혔습니다. 100% 지분 소유 자산의 매각액은 총 5억 4,500만 달러였습니다.
• 브랜디와인은 해당 분기 동안 합산 부채를 미상환 부채의 13%가 넘는 3억 9,000만 달러 감축했으며, 100% 지분 소유 기준으로 연간 이자 비용을 약 2,400만 달러 절감했습니다.
• 100% 지분 소유 포트폴리오의 임대율은 90.5%, 입주율은 89.0%를 기록했습니다. 분기 임대 면적은 2026년 최고치인 55만 8,000제곱피트에 달했으며, 원 업타운(One Uptown)의 임대율은 97%로 상승했습니다.
• 경영진은 연간 FFO 전망치 중간값을 주당 0.55달러로 유지하고, 4분기 핵심 FFO는 주당 0.16달러에서 0.18달러로 전망했습니다.
• 3분기 연환산 합산 EBITDA 대비 순부채 비율은 2분기 9.0배에서 7.6배로 하락했습니다. 경영진은 추가로 1억 달러의 현금을 부채 상환에 투입한 후 연말 기준 7.8배에서 8.0배 수준이 될 것으로 예상합니다.

주요 재무 데이터

사업 및 운영 성과

브랜디와인은 해당 분기 동안 100% 지분 소유 포트폴리오 내 37만 2,000제곱피트를 포함해 총 55만 8,000제곱피트의 임대 계약을 체결했습니다. 선행 임대(Forward leasing)는 총 16만 3,000제곱피트였으며, 이 중 11만 1,000제곱피트는 2026년 중 개시될 예정입니다.

임차인 유지율은 50%를 기록했습니다. 경영진은 필라델피아 CBD 및 펜실베이니아 시장에서의 예산 외 재계약과 확장 계약에 힘입어 연간 유지율 목표 중간값을 54%로 상향 조정했습니다. 아울러 예상 자본 비율을 기존 12%~13%에서 11%~12%로 하향 조정했습니다.

포트폴리오의 GAAP 시가평가(mark-to-market) 임대료 상승률은 10.8%, 현금 기준 시가평가는 5.7%였습니다. 연간 GAAP 시가평가 전망치는 기존 5%~7%에서 5%~6%로 좁혀졌습니다.

필라델피아 시장의 입주율은 95%, 임대율은 96%였으며 2028년까지 연간 약 7%의 임대 계약 만기가 도래합니다. 브랜디와인은 2026년 첫 9개월 동안 필라델피아 CBD 및 유니버시티 시티 하위 시장에서 체결된 신규 임대 계약의 60%를 차지했으며, 이는 공시된 시장 점유율 15%를 크게 상회하는 수치입니다.

펜실베이니아 외곽 교외 포트폴리오의 임대율은 93%였습니다. 오스틴은 입주율 66%로 가장 부진한 시장으로 남아 전체 입주율을 약 400베이시스포인트(bp) 낮추는 요인이 되었습니다. 운영 포트폴리오 임대 파이프라인은 세부 협상이 진행 중인 약 30만 제곱피트를 포함해 200만 제곱피트 수준으로 안정세를 유지했습니다.

원 업타운(One Uptown)의 임대율은 97%에 달했습니다. 브랜디와인은 2027년 1분기에 자본 재구조화(Recapitalization)를 모색할 계획이며, 경영진은 이를 통해 약 2,500만 달러의 순수익을 확보하고 귀속 부채를 약 5,000만 달러 감축할 수 있을 것으로 예상합니다.

경영진 전망

경영진은 연간 전망 범위를 축소하면서도 2026년 FFO 중간값을 주당 0.55달러로 유지했습니다. 4분기 핵심 FFO는 주당 0.16달러에서 0.18달러 수준으로 전망했습니다.

4분기 부동산 NOI는 약 6,800만 달러로 예상됩니다. 매각된 자산에 따른 NOI 감소분은 래드너 호텔(Radnor Hotel)에서 발생하는 전분기 대비 80만 달러의 개선과 3025 JFK에서의 추가 80만 달러 개선으로 일부 상쇄될 전망입니다.

회사는 4분기 일반관리비(G&A)가 약 700만 달러에 달할 것으로 예상하며, 연간 범위는 3,600만 달러에서 3,700만 달러를 유지했습니다. 이연 금융 비용을 포함한 4분기 이자 비용은 자본화 이자 40만 달러를 포함해 약 3,500만 달러로 전망됩니다.

경영진은 4분기에 현금 1억 달러를 추가로 투입해 부채를 감축할 계획입니다. 연말 EBITDA 대비 순부채 비율은 7.8배~8.0배, 고정비용 보상배율(fixed-charge coverage ratio)은 1.8배~2.0배로 전망됩니다.

경영진은 2027년에 기존 보유 시장 내 부동산, 비핵심 시장 자산 및 부지를 포함해 약 2억 달러 이상의 추가 자산 매각을 추진할 것으로 예상한다고 밝혔습니다. 이는 아직 공식적인 2027년 가이던스는 아닙니다.

리스크 및 주시해야 할 사항

오스틴의 입주율(66%)은 전체 포트폴리오 입주율에 상당한 부담으로 작용하고 있습니다. 브랜디와인은 리버 플레이스(River Place) 오피스 동 하나를 주거용으로 전환할지 여부를 검토 중이나, 최종 결정은 발표되지 않았습니다.

2027년 IBM의 임대 계약 만료로 인해 연간 NOI가 약 1,100만 달러 감소할 것으로 예상됩니다. 경영진은 사전 임대 계약을 확보한 후 최소 1개 기존 건물을 재개발할 계획이며, 원가 대비 수익률(return on cost) 8%~9%를 목표로 하고 있습니다.

회사의 3분기 CAD(분배가능현금) 배당성향은 103%를 기록했으며, 이는 임차인 재계약 지출 및 수익 유지 목적의 자본 지출 증가를 반영한 것입니다. 경영진은 이자 절감, 임대 흡수, 자산 매각 및 IBM 계약 만료 상황을 평가하면서 배당금을 분기별로 계속 검토하고 있다고 밝혔습니다.

경영진은 또한 부채 비용 상승이 부동산 가격 책정에 압박을 줄 수 있다고 짚었습니다. 3151 마켓 스트리트(3151 Market Street)를 제외하면 최근 매각된 자산들은 8%대 중반의 혼합 캡레이트(자본수익률)로 거래되었으며, 회사는 자본 시장 여건을 고려해 2027년 매각 시기와 대상을 평가할 계획입니다.

애널리스트 Q&A 하이라이트

경영진은 자산 매각 대금의 우선적인 용도가 여전히 부채 감축임을 재확인했습니다. 브랜디와인은 순매각 대금의 5%~10%를 자사주 매입에 할당할 수 있는 유연성을 유지하고 있으나, 실제 자사주 매입은 해당 수준을 하회했습니다.

3151 마켓 스트리트와 관련해 경영진은 이번 매각을 통해 향후 지출될 약 8,000만 달러 규모의 자본 지출을 절감했다고 밝혔습니다. 회사는 7%대 중반의 안정화 수익률이 예상되는 부동산을 보유하는 것보다, 해당 자산을 매각해 8%가 넘는 수익률의 부채를 상환하는 것이 재무적으로 더 유리하다고 판단했습니다.

오스틴 시장과 관련해 경영진은 업타운 ATX(Uptown ATX)가 핵심 주력 대상이라고 밝혔습니다. IBM 건물 재개발을 위한 임대 파이프라인은 150만 제곱피트에 달하며, 확장이나 통합 공간을 찾는 테크 및 금융 서비스 임차인들이 포함되어 있습니다.

IBM을 제외하면 경영진은 2027년에도 지속적인 임대 수요 흡수가 이뤄질 것으로 기대하고 있습니다. 내년에 임대 계약이 만료되는 3만 제곱피트 이상의 임차인은 2곳에 불과하며, 회사는 두 곳 모두 재계약을 체결할 것으로 예상합니다.

실적 발표 전화회의 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Thank you for standing by, and welcome to the Brandywine Realty Trust Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now, I'd like to introduce your host for today's program, Jerry Sweeney, President and CEO. Please go ahead, sir.

Jerry Sweeney

Jonathan, thank you very much. Good morning, everyone. Thank you for participating in our third quarter 2026 earnings call. On today's call with me today are Dan Palazzo, our Senior Vice President and Chief Accounting Officer; and Tom Wirth, our Executive Vice President and Chief Financial Officer.

Just to note, prior to beginning, certain information discussed on the call today may constitute forward-looking statements within the meaning of the federal securities law. Although we believe the 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.

Okay. So during our prepared comments today, Tom and I will briefly review third quarter results and frame out our key assumptions that drive our guidance for the balance of the year. After that, Dan, Tom and I are available to answer any questions.

From a capital markets operating and liquidity standpoint, the third quarter produced results that exceeded or were in line with our 2026 business plan. And since our last call, we've made significant progress on our capital markets plan, primarily on asset sales and debt reduction. Quarterly highlights include: we increased our 2026 sales guidance from $305 million to $681 million, highlighted by the sale of 3151 Market Street and our partnership interest in Solaris House in Austin, Texas. The 3151 sale was for $240 million, or $544 per square foot. And it's important to note as we identified in the SIP that, that sale also eliminated our forward capital spend of almost $80 million.

On our sales target, we are 100% achieved and fully funded. Our speculative revenue target increased by an additional $1 million, and we are 100% achieved at $19.5 million with basically nothing left to do for the balance of 2026 on that target. This marks the second increase to our speculative revenue target this year and is now almost 12% higher than our initial 2026 business plan. Third quarter FFO of $0.14 per share was in line with management guidance and estimates. We are maintaining our $0.55 per share full year midpoint and have narrowed our full year FFO guidance range. Our core FFO results, as Tom will articulate, exclude losses on early extinguishment of debt that we occurred during the quarter.

With the increased sales achieved, we had paid off $390 million or over 13% of our outstanding combined debt. This is a $218 million increase over our initial 2026 debt reduction target. That does include the payoff of the loans securing both 3151 Market and Solaris House. Accelerating these debt paydowns lowered our year-end net debt-to-EBITDA midpoint from 8.4x to 8.8x down to 7.8x to 8x, about an 8% reduction at the midpoint, and reduced our quarterly run rate from 9.0x in Q2 to 7.6x in the third quarter.

From an operating standpoint, solid operating metrics during the quarter reinforced our strong market position. And what we're continuing to see is the tenants' preference for very high-quality office space. Our wholly owned portfolio is 90.5% leased and 89% occupied. We had a very small negative net absorption of about 7,000 square feet during the quarter. Our year-end occupancy and lease percentages will improve through year-end. And we will have positive net absorption for the first time in several years, I think, is additional evidence of our pipeline continuing to build and our portfolio quality.

Leasing activity for the quarter was our highest for the year, totaling 558,000 square feet, including 372,000 square feet in our wholly owned portfolio. Also included in that number is about 114,000 square feet that we leased at One Uptown since our last call, bringing that property to 97% leased. Forward leasing commencing after the quarter totals 163,000 square feet with 111,000 square feet taking occupancy this year. Tenant retention was 50%, resulting in our raising our full year midpoint retention target to 54%. This raise was mainly due to unbudgeted renewals and expansions in both the Philadelphia CBD and Pennsylvania marketplaces.

Our capital ratio for the quarter was 8.9%. That allowed us to narrow and lower our 2026 business plan range from 12% to 13% to 11% to 12%. Our GAAP mark-to-market was 10.8%. We are narrowing our full year guidance range to 5% to 6% versus 5% to 7%. Cash mark-to-market was 5.7%. The adjustment to the guidance are a result of executing lower-cost capital renewals with existing tenants. As a result, this quarter, our CAD number was higher than planned due to a number of those unbudgeted renewals that temporarily increased our revenue maintaining CapEx run rate.

Same-store results were negative 0.6% on a GAAP basis and a positive 1.7% on a cash basis, both within our current guidance ranges. Tour volumes in the third quarter remained very strong, slightly below the high volume we saw in Q2 with higher tour volumes in our CBD and University City markets, slightly lower in the Pennsylvania suburbs and the same levels quarter-over-quarter in Austin. We also continue to experience very good tour conversion rates. For the trailing 4 quarters, 54% of tours converted to a proposal. From proposal, 49% converted to an executed lease. Both are running ahead of our historical averages.

Just a few additional comments regarding market dynamics. In Philadelphia, we're now 95% occupied and 96% leased with only 7% rolling annually through 2028. We continued our outperformance trend in the CBD and University City during the first 9 months of this year, with 60% of all new leasing signed in our CBD and University City submarkets being at a Brandywine property, as I noted on previous calls, significantly exceeding our 15% market share. Residential -- office to residential conversion activity now aggregates in Philadelphia CBD over 5 million square feet. It's about 11% of Philadelphia's inventory. And we believe that, that dynamic will continue and further improve our competitive market position.

In the Pennsylvania suburbs, we're 93% leased, and we continue to see solid levels of pipeline prospects for the existing vacancies, particularly in our Radnor submarket. Austin, at 66% occupancy, continues to lag the rest of the portfolio and does create about a 400 basis point drop in our overall company occupancy numbers. The operating portfolio leasing pipeline remains stable at 2 million square feet, and this pipeline includes about 300,000 square feet in very advanced stages of negotiation.

Shifting to the balance sheet. Our liquidity position improved significantly during the quarter. While we had $137 million balance outstanding on our line of credit at quarter-end, upon receipt of quarter-end sale proceeds, we paid off that balance in early October. As such, there is no outstanding balance on our line of credit, and we have $175 million of cash on hand. As I noted previously, during the third quarter, we reduced outstanding debt by almost $400 million, resulting in total -- including wholly owned and joint venture about $27.2 million of interest savings. And included in those amounts are about $140 million of bond retirements that we retired at an average interest cost of 8.7%.

Obviously, the vast majority of our sale proceeds, consistent with our business plan, were used to reduce leverage and improve credit metrics. We will continue to use our cash balances and any subsequent sale proceeds to further reduce debt, including repurchasing bonds in the fourth quarter and to a much lesser extent, to the extent dictated by the market, repurchasing shares. As we noted on previous calls, until we make significant progress on all of our leverage targets, we anticipate using only 5% to 10% of net proceeds to purchase shares. Our plan remains returning to investment-grade metrics. We will maintain minimal balances on our line of credit. And the execution of the sales program this year has been an excellent catalyst to reduce leverage and further improve all of our credit metrics.

With our sales activity now complete and debt reduction underway, as I noted previously, we expect a significant improvement to our net debt to EBITDA. The year-end target we have identified in the SIP does assume we continue to apply about $100 million of cash on hand to further reduce outstanding debt during the fourth quarter.

On One Uptown, which is the only remaining development project, we made significant progress during the quarter. And as I noted, it's now -- we are now 97% leased. We expect this project to stabilize in the third quarter, slightly behind schedule due to build-out times with lease execution, but at a slightly higher pro forma yield. What's interesting to note is the Uptown submarket where our projects are located is now about 95%-plus leased with a vacancy rate, including sublease space, of less than 5% and really no large available blocks of space.

So, as noted previously, in anticipation of our 2027 IBM lease expiration that will have an impact of about $11 million of net NOI on us, we plan to commence the redevelopment of at least one of those existing buildings upon achieving pre-leasing activity. Since announcing this redevelopment initiative, the pipeline has risen to about 1.5 million square feet with all those prospects having lease commencement dates between late '27 and 2030. So the market response continues to be exceptional. The first building consists of 157,000 square feet. And again, assuming pre-leasing, and we're in significant discussions with some prospects, we expect to deliver a renovated building by year-end '27. Also as prospective tenants requirements' advance, we do have a planning underway to do similar renovations at some of the other buildings. As we discussed in our last call, our hope was to sell Solaris, our 340-unit residential project in Austin. That sale closed in September. We received net proceeds after paying off the $76 million construction loan and paying off our preferred investor. That project was held in a joint venture with Brandywine owning about 57% and was sold at a sub-4% cap rate.

As we've already highlighted, we've increased our 2026 business plan target to $681 million. And we're frankly delighted to achieve this increased sales target, particularly in light of the very choppy capital markets. So our team did a wonderful job of getting all those transactions closed without any retrade of pricing and on schedule. And the response from the market for the asset sales, even with the choppy market conditions, was fairly strong. We had considerable interest, and the typical marketing process had between 7 to 10 qualified bids. All buyer types were engaged, including users, institutional investment managers, private REITs and significant interest from private capital.

So with that overview, and our clear priority to continue to lower leverage and return to investment-grade metrics, I'll turn the floor over to Tom to review financial results for the second quarter and the outlook for the balance of the year.

Thomas E. Wirth

Thank you, Jerry, and good morning. Our third quarter net loss was $22.3 million or $0.13 per share. And our core FFO, which excludes debt extinguishment charges, totaled $15.4 million or $0.09 per share, totaling $24.6 million or $0.14 per diluted share and met the second quarter guidance and consensus estimates.

Some general observations for the third quarter. [ Property ] NOI was $68.5 million, or $1.1 million below our forecast, due to lower retail and residential income. We anticipate improvement in those areas in the fourth quarter. G&A expense was above our reforecast by $0.5 million, primarily due to compensation expense. Third quarter fees were $2.1 million, or $0.5 million above reforecast, primarily due to third-party leasing fees. Quarterly JV FFO, interest expense and other income were generally in line with the forecast.

Looking at debt metrics, third quarter debt service and interest coverage ratios were 1.7x, both equal to our second quarter results. We expect those coverage ratios to improve in the fourth quarter as we experienced the full quarter impact of our bond purchases. Our third quarter annualized combined net debt to EBITDA was 7.6x, reflecting proceeds from our sales and corresponding debt repayments. During the fourth quarter, we expect these coverage ratio levels to increase slightly, based on having -- based on having the full quarter impact of sold properties in the fourth quarter cash flow. During the third quarter, we had no significant changes to our core portfolio since the properties that were sold during the quarter were either held for sale or classified as development.

After -- looking at liquidity and financing, after the line of credit was paid off in early October, we had a solid liquidity position of $175 million of cash and no outstanding balance on our unsecured line of credit. As Jerry mentioned, on sales activity, we increased our target to $545 million on a wholly owned basis, which is 100% achieved and funded. The weighted average cap rate on those sales was 4.7% on a cash basis and 4.9% on a GAAP basis. In addition, the sales reduced our forward capital commitments, as Jerry mentioned, by around $79 million. A majority of these proceeds have been used to reduce debt, and we'll continue on our path back to investment grade. We also have a portion of those sales being used for share buybacks.

Looking at our unsecured bonds, our planned buyback of existing unsecured bonds focused on bonds with higher coupons that will have a more immediate impact on our coverage ratios. During the quarter, we purchased $140 million of secured bonds, representing $50 million of the 2028 bonds and $90 million of the 2029 bonds, reducing annual interest expense by $12.5 million. We incurred debt extinguishment cost of about $9.2 million. However, as we -- we did not include those in our second half FFO guidance as we discussed in the previous call. Our C-PACE loan in connection with the sale of 3151 Market, we prepaid our $57.3 million loan with a 7.3% interest rate that collateralized the property. The early prepayment resulted in a $6.2 million loss on the early extinguishment of debt.

As outlined on Page 1 of our supplemental, during the quarter, we reduced debt, including the line of credit, by $390 million, which resulted in $24 million of annual interest expense savings on a wholly owned basis. The $24 million reduction represents approximately 18% of our second quarter 2006 (sic) [ 2026 ] midpoint guidance for annual interest expense. We anticipate using another $100 million of cash on hand to further reduce debt during the fourth quarter. Our unsecured line of credit had an initial maturity date of June 26 with 2 6-month extension options through June of '27. With our sales program now complete, we continue to work and our debt reduction program almost complete. We will work with our bank group to try and extend the line of credit this quarter.

As we mentioned, recapitalization of our joint ventures, we've made significant progress toward recapitalizing the final 2 preferred equity development projects located in Austin, Texas. We have sold Solaris for $136 million and received over $16 million of cash after repaying our partner and existing construction loan. And we reduced the debt attribution from that by $43.6 million. We are now 97% done at One Uptown on the leasing front, our office project, and we plan to recap that asset in the first quarter of '27 rather than the fourth quarter of '26, based on the timing of the leasing. We expect that transaction to provide about $25 million of net proceeds and reduce our debt attribution by about $50 million in 2027.

Property-level income -- now let's -- looking at the fourth quarter. Property-level income for the quarter should be about $68 million and will be about $0.5 million below the third quarter. The incremental decrease is primarily due to the sold properties between the NOI in the third quarter versus the 0 NOI in the fourth quarter, and that decrease will be about $2 million. Offsetting that $2 million is improvement in the Radnor Hotel, which commenced operations earlier this year and is producing an incremental $800,000 of NOI between the third and the fourth quarters, and improved operating results at 3025 JFK, which also has $800,000 of improvement between the third and the fourth quarter. FFO contributions from our joint ventures will be about $0.5 million.

G&A expense for the fourth quarter will total about $7 million. The sequential decrease is consistent with prior years, and our full year range is still $36 million to $37 million. Interest expense, including deferred financing costs, will approximately be $35 million, which includes $400,000 of capitalized interest. We've lowered our full year expense range by $3 million at the midpoint to account for the lower debt balances. As previously mentioned, in connection with potentially retiring additional debt, we may incur additional debt extinguishment costs during the fourth quarter that are not currently in our FFO or core FFO guidance. Termination fees and other income will total about $2.5 million. Net third-party fees will be about $2 million.

Interest income will total about $1 million with the cash we currently have on hand. And our diluted share count for the quarter should be about 177 million shares, reflecting the share buyback we did in the third quarter. And for clarity, the fourth quarter forecast will then result in core FFO range of $0.16 to $0.18 per share.

During our -- turning to the capital market plan for the fourth quarter, which is pretty straightforward and totals about $165 million. Our third quarter CAD payout ratio was 103%. We've adjusted the CAD payout ratio to account for increased tenant renewals and revenue maintain capital that's being incurred, as well as some of the older capital that dates back to pre-2024. Looking at the larger uses, development spend will total $20 million, and we will then have $14 million of common dividends, $10 million of revenue maintaining capital, $11 million of revenue creating capital and $10 million of equity contributions to our joint ventures. The sources are going to be $20 million of cash flow after interest and using $145 million of our cash on hand.

Based on the capital plan, we anticipate having a small amount of cash and no outstanding balance on our line of credit. We anticipate our net debt-to-EBITDA range to be 7.8 to 8.0 and our fixed charge ratio to be between 1.8 and 2.0. Implicit in these ratios is further reducing debt by another $100 million during the quarter. While the debt -- the increase to 2026 sales has accelerated our deleveraging program. We are focused on additional sales in 2027 as we continue our goal to improve our pricing in public market debt and our ratings.

I will turn the call back over to Jerry.

Jerry Sweeney

Thanks very much. So, as we look ahead, our asset quality and operating teams will really enable us to continue capitalizing on improving real estate market conditions. And we do expect overall market conditions, from a leasing standpoint, to continue to improve as we move into 2027. I think the success of our sales program has resulted in significant debt reduction well ahead of plan, improved liquidity, lower forward capital cost, which is a very key point that we are focused on, and really the complete elimination of our forward development risk. The groundwork has been laid through the '26 business plan execution so far. We plan on building on that continued momentum to drive long-term value.

With that, Jonathan, we're delighted to open up the floor for questions. [Operator Instructions]. Thank you very much.

Operator

And our first question for today comes from the line of Nick Joseph from Citi.

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Nicholas Joseph

Jerry, you outlined, obviously, a lot of the progress that you've made over the quarter and the year. I guess, just as I think about the capital plan going forward, you mentioned still 5% to 10% to buy back shares. Why is that the right level versus using almost all the proceeds to continue the deleveraging plan?

Jerry Sweeney

Yes. I think it just provides us some additional flexibility. And frankly, as we set the target at the 5% to 10%, we announced it on the last quarter call, we bought back much less than that. I think the major focus -- and I'm glad you raised the question. It's nuanced. Our major focus is continuing to reduce our overall leverage and improving all of our key credit metrics to get back on the path towards investment grade. So hopefully, that clarifies. We keep that flexibility out there based upon what we're seeing in the marketplace. But the reality is that the vast majority, almost without exception, is being applied to reduce debt, whether that be some of the construction secured loans we have or continuing to get in the marketplace to retire bonds.

Nicholas Joseph

And then, with One Uptown now 97% leased, what's the appetite to recap that asset?

Jerry Sweeney

I think we're going to take a hard look at that. We're already starting to talk to some potential partners to recap that and improve our balance sheet metrics. And as Tom outlined, now with that project fully leased, and some of those leases, quite honestly, were in the process for a long period of time. But I think this quarter, we were able to get all of them across the finish line. The build-out periods are underway for most of those tenants, and we expect all that capital to be spent in the first part of the year. So we're very keen, as Tom outlined, on fully vetting and exploring a recap option for that property in the first quarter.

Operator

And our next question comes from the line of Dylan Burzinski from Green Street.

Dylan Burzinski

Maybe just touching on Austin because it seems like if you look at the portfolio, right, the Philly stuff is largely leased up fully today, maybe with a little room for improvement on the suburb side of things. But just looking at Austin, it appears that's going to be sort of the major driver that sort of gets you guys over the hump into the total portfolio occupancy range of [ above ] 90%. So I mean, this is a portfolio that you continue to see a leasing pipeline grow? Do you guys feel like your assets are well positioned? Maybe if you can kind of just talk about your overall long-term plans in Austin, that would be helpful.

Jerry Sweeney

Yes. It's a great question. Thank you. As I mentioned on previous calls, our major focus really with -- in Austin is on our Uptown ATX development. And there, we're really happy that early next year, the train station will be fully operational. They expect that to be the second busiest train station along that line. And I will tell you truly, that was a major draw for us to attract a number of these tenants to One Uptown. So it's not a singular focus in Austin and Uptown, but that's our primary focus. Where we have vacancy in Austin right now, we have Four Points Centre, one of those buildings that we continue to see a building pipeline there and hope to get some traction.

We are actually pursuing a couple of prospects currently. And in River Place, which really consists of 2 individual pods, we're actually evaluating converting one of those pods to residential development. There was some state legislation passed in Austin that -- or in Texas that accelerates the ability to do office to residential conversions. The submarket dynamics where River Place is, Dylan, have changed a little bit more towards residential versus office. So we're carefully assessing the outcome of at least taking one of those pods and moving into a residential redevelopment process that -- the first part of that we put in that -- some of that on the market to see what other developers in that marketplace value that site at so we can evaluate what we think our appropriate next steps are.

Dylan Burzinski

That's helpful. Yes, that's extremely helpful. I appreciate that. Maybe just one last one. Thinking about the solid execution and the successful execution of the disposition plan in '26, I mean, how do you sort of think about the portfolio today? Do you feel like you still have a large percentage of not what you would deem noncore assets? And then, how should we sort of think about potential additional proceeds over the next, call it, 2, 3, 4 quarters?

Jerry Sweeney

Yes. I think -- obviously, we're not announcing anything relative to '27 at this point. But as we -- as Tom and I both touched on, we do anticipate about another $200 million and maybe more in sales next year. Some of those, Dylan, will be in-market assets. Some of those will be in what we consider to be some of our noncore markets. But -- and some of that may frankly be land parcels. We're taking a hard look at our land inventory to figure out what parcels we want to liquidate and more effectively deploy that capital. So, one of the interesting things is, given kind of the capital market volatility, it's really given us an opportunity to kind of take a look at where we want to sell assets and then how we use those proceeds, as we have thus far in '26, to really reduce leverage, reduce our forward capital calls and improve financial flexibility.

Operator

[Operator Instructions] Our next question comes from the line of Michael Lewis from Truist Securities.

Michael Lewis

I was just going to ask, any additional details or color regarding progress on the 2027 lease expirations other than IBM, obviously, which we know about? And excluding IBM, do you expect occupancy to move up next year? Or are there other pockets of downtime in the portfolio?

Jerry Sweeney

Yes. We -- Michael, thanks for the question. We are very actively going out into our forward maturity curve for both '27, '28 and '29, looking to kind of get some early renewals done across our portfolio. We've been successful in getting a couple done this quarter and have a few underway. And one of our objectives is to really minimize that rollover, particularly in '28, '29, down to levels we were experiencing in '25 and '26. And we think the market is constructive for that business approach. There's clearly a recognition by both our customer base, both existing and prospective, as well as the brokerage community, that there is an increasing dearth of really high-quality, well-run, good landlord space in our key markets. We're using that to our maximum advantage. So I think, generally speaking, from a business plan standpoint, we are moving very expeditiously on all of those forward renewals. And we do expect to be able to further derisk our operating portfolio over the next several quarters.

I mean, Tom, do you have anything to add to that?

Thomas E. Wirth

Yes, Michael, as we look at '27, again, putting aside IBM, as you asked, I think we will see some absorption -- continued absorption next year, as Jerry mentioned. We only have 2 tenants in the portfolio over 30,000 square feet that are expiring next year. And we think both of those tenants will renew. So really -- but looking at -- and then, you go down below 30,000 on other tenants that take a -- closer to the renewal date are going to start talking with them, which we are now. But it's fairly low in terms of any other large tenants expiring in 2027.

Jerry Sweeney

The dynamics are actually -- I'm sorry, Michael. The dynamics are actually improving significantly just in terms of -- when we take a look really at CBD, University City and particularly Radnor, we think there's room to get early renewals done there and accelerate the absorption of some of our existing vacancy.

Michael Lewis

Okay. Appreciate that. And then, for my second question, you mentioned the $200 million of potential dispositions next year. I guess, I'm going to ask about pricing, right? The 4.7% cap rate on the dispositions, obviously, you had one large property, 3151, basically at 0 and you had Solaris in there. Is there any more color you can give on what's happening to office cap rates for stabilized assets, given the change in the cost of capital?

Jerry Sweeney

Yes. Great question. And actually, let me amplify. If you would exclude 3151 from our calculation of cap rates, the remaining properties sold right around our projected mid-8% cap rate. There's some lower, a little bit higher, but blended was about in the mid-8s. So the last 30, 60 days, with interest rate volatility, the new inflation numbers, I think it's certainly at least short-term change dynamics. So we were really happy, Michael, to get all of our sales done and locked away before all this increased market volatility.

Look, the reality is that as debt costs go up, that has a corresponding impact on pricing. So as we start to look at what our sales program will be for 2027, we're going to be very -- stay very close to what we're hearing back from the investment market on both the timing and composition of those sales. We're certainly very mindful that when we sell a property, we lose income. And I think that the success this year of being able to sell on a blended basis properties well below the cost of debt that we repurchased was very additive to our balance sheet and to our income stream. I think we're going to be taking a hard look at that same metric of being applied in 2027 as well.

Operator

And our next question comes from the line of Manus Ebbecke from Evercore ISI.

Manus Ebbecke

Could you expand on your commentary around the tenant demand for the IBM buildings? Give some color maybe on what type of tenants are looking there, if there are current existing tenants in the market expanding or new to the market tenants. And I'm just curious about the economics you kind of target for those re-devs.

Jerry Sweeney

Yes. Thank you for the question. The pipeline, as I mentioned, is about 1.5 million square feet. Those size tenants range from a low of 20,000 to 30,000 square feet up to several hundred thousand square feet. It's actually a fairly good mix between technology and financial service companies. Most of the tenants are in market, and I'll use the term market being all of Austin, and a number are looking for expansion or consolidation opportunities. As I alluded to a few moments ago, we are, I think, beginning to reap the marketing benefits of access to this train station. That employee mobility, traffic congestion, affordable housing have all been issues that have really risen to the fore in Austin. And I think Uptown ATX, given its location in the Northwest, but also proximity to the far northern suburbs and easy access to downtown, I think really creates a very valuable marketing platform for us.

As I mentioned on the previous calls, we're planning to deliver these buildings somewhere in the mid-8s to 9% return on cost. And we'll really only proceed with the planning and the execution once we get a much higher level of visibility and leases done with some of these prospects. But we think that, that's a good runway for us over the next couple of years. I mean, certainly, as we take a look at the IBM role and the income that $11 million or so we will lose in income next year, we're certainly very mindful of how we start to replace that revenue stream, while at the same time, building a very effective neighborhood at One Uptown that will deliver longer-term value for us.

Manus Ebbecke

Got it. I appreciate it. And maybe the quick follow-up just on whether the high demand that you've been seeing in that submarket has already resulted in some interest for future phases of ATX, for example, Phase B or anything else? And how that kind of triangulates with your thoughts on just like general capital allocation and deleveraging?

Jerry Sweeney

Yes. Look, I think we continue to see a high level of broad-based activity in that marketplace. And as you know, from our previous calls, we do have planning underway for Block B and D. Block B and D are primarily retail and multifamily with potentially a hospitality component. While we're going through the planning process, there's no desire in our part to proceed with those until there's firm lease commitments, firm financial commitments and it layers very nicely into our overall balance sheet strategy.

So right now, we're planning. The approval process down there can be a bit protracted to getting some of those pieces pulled together. But from a capital deployment standpoint, what we're seeing in the intermediate term is, moving forward the renovation of the 900 Series buildings, subject to pre-leasing. And then, we'll see what the capital market conditions present to us as we think about any other future phases.

Operator

And our next question comes from the line of Upal Rana from KeyBanc Capital Markets.

Upal Rana

Jerry, maybe you can talk a little bit about your decision to sell 3151 Market. Last quarter, you mentioned negotiating with a multi-floor tenant at the property, but ultimately decided to sell. So any color there would be helpful, especially on life science leasing dynamics in the Philadelphia CBD would be helpful.

Jerry Sweeney

Thank you for the question. Look, on 3151, our goal was to deliver a very high-quality building that will be very additive to both our portfolio and to our Schuylkill Yards neighborhood. Clearly, the life science market changed since we commenced construction of that project, where demand drivers are still there, but they're much more muted than the demand levels were several years ago. And as a consequence of that, as you know, about a year or so ago, we pivoted to kind of a mixed life science office leasing strategy. And we were getting traction on that. I think the decision for us came down to this.

We had the ability through that building to bring a Fortune 500 company with over 2,000 employees as a base to Schuylkill Yards and to further cement Schuylkill Yards as the place to be with mass transit access in the city. When we took a look at the time line to lease up the balance of that building, and as Tom and I both touched on the $80 million or so future capital commitment to deliver a building that will yield in the mid-7% range to us, the capital markets actually presented an amazing opportunity for us to sell that building, again, bring a big employment base into the city and Schuylkill Yards, eliminate that forward capital spend, obviate the lag time to get income in place and sell that property and buy back bonds at over an 8% yield.

So from our perspective, it was really a financial decision to say we can generate significant liquidity, generate proceeds, immediately redeploy those proceeds back into buying back higher-priced debt. And that higher-priced debt was yielding more on retirement to us than the stabilized return on the property. So it was a challenging real estate decision because we thought it could create some great value there. But from a financial planning standpoint, given the current capital market conditions and our ultimate goal to get to investment-grade metrics, it was an easy decision.

Upal Rana

Got it. That was really helpful. And then, last one for me would be just on the dividend. With the full year impact of all the dispositions you've done and plan to do, as well as the IBM move out next year, how are you assessing the dividend coverage today? I guess, how much lease commencements need to come online and interest savings need to occur to support the current payout?

Jerry Sweeney

Yes. We're going through our '27 planning process right now. And certainly, from our perspective, as we're looking at the -- the dividend coverage is higher than we wanted to be at the beginning of this year. We targeted between 70% and 90%. We frankly had -- we're a lot more successful in getting a lot of renewals done that generated the need for additional revenue maintaining CapEx, which kind of drove that percentage up. So we're probably going to take a hard look at that run rate, take a hard look at what our overall -- the net impact of our interest rate savings is versus what we project the absorption to be in '27, impacted by IBM rollout, then we'll make a decision. We review that every quarter with the Board. Right now, we're feeling very good about where the dividend is. We're certainly hoping that the stock price recovers, so the dividend yield goes down. But it's -- that's a source of capital. That's always on the table as we review our business plan and business plan progression with the Board on a quarterly basis.

Operator

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Jerry Sweeney for any further remarks.

Jerry Sweeney

Great, Jonathan, thanks for your help today, and thank you all for participating in our third quarter conference call. We wish you the best as we head into the end of the year and the holiday season and look forward to providing an update on our '27 business plan early next year. Thank you very much.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.