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Brandywine (BDN) Gets Final Nod for Broadmoor Redevelopment

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Brandywine Realty Trust (BDN - Free Report) recently earned the final approval from the Austin City Council for the rezoning and extensive redevelopment of the Broadmoor Campus in North Austin. Brandywine bought the community in 2015 and now plans to revamp the property with a “mixed-use, transit-oriented and highly-amenitized urban environment.”

Notably, the campus occupying one million square feet of space on 66 acres is conveniently located in the population center of the greater Austin area, east of The Domain. It serves as a campus for technology giant IBM Corp. (IBM - Free Report) and will likely be pitched as Austin’s bid for Amazon’s (AMZN - Free Report) second headquarter.

The zoning change request will permit a high-density construction and also enable the company to build taller structures of height 360 feet from the existing 120 feet. Further, the floor-to-area ratio would be raised from 5:1 to 8:1, with up to 80% of impervious cover limit. This will enable the developer to significantly expand the campus’ capacity.

A relocation of the Kramer Metro Rail Station from Kramer Lane and addition of bus stops in the Broadmoor campus are also in the cards. In addition, the redevelopment plan includes the construction of 2,000 housing units, accommodation of addition of parking space, two hotels and more office space.

The focus on mixed-use space with convenient transit facilities will open up new opportunities for the company. In fact, with increased size and easy transportation access post redevelopment, the Broadmoor campus will be fully equipped to support the online giant’s demand.

Further, the company plans an overhaul of buildings 906 and 908 in order to suit needs of new tenants. Per management, the site is already witnessing strong demand, and leasing activity from prospective tenants and anticipates the site to be fully leased by 2018.   

Moreover, the company has significant presence in the Austin area with more than 2.6 million square feet of Class A office space. Additionally, the company has two upcoming projects at Four Points Centre and Garza Ranch, which are expected to further strengthen its foothold in the area.

Nonetheless, this massive redevelopment is a capital-intensive plan and may impact the company’s liquidity. In fact, Brandywine will incur higher expenses relating to the relocation of the Kramer Metro Rail Station. Also, it increases operational risks by exposing it to rising construction costs, entitlement delays and lease-up risks.

Shares of this Zacks Rank #3 (Hold) company have underperformed the industry in the past six months. The stock has declined 6.9% compared with the industry’s gain of 0.4%.


 

A better-ranked stock in the same space is Extra Space Storage (EXR - Free Report) with a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Its Zacks Consensus Estimate for 2018 FFO per share remained unchanged at $4.62 over the past month. The stock has returned 16.2% in six months’ time.

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