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Brandywine REIT vs. Freedom Office
Brandywine Realty Trust and Freedom Office are real estate investment companies that have become popular due to their outstanding investment strategies. The companies rely on forward-thinking, which allows them to anticipate future demands and support their clients in making broad investment decisions. Furthermore, the companies focus on setting new standards in the industry and primarily on building exceptional customer experience and participating in corporate social responsibility (Brandywine Realty Trust). Both companies also have a rich history, which defines their resilience, remarkable growth, and excellent financial management techniques. Therefore, analyzing the two companies provides essential insights regarding the operation of a real estate company.
Return on investment is one of the essential concepts to determine a company’s success. Brandywine Realty Trust’s return on investment has been steady from 2010 to 2020, although it sharply rose from the second half of 2020 up to the first half of 2021. In the second half of 2021, return on investment fell sharply. For instance, ROI in 2010 was -0.59%, and in 2020, it was 1%.
However, it rose from 1% in 2020 to 8.36% in 2021 and fell to 0.33% in the same year. However, Freedom Office is on a different case because the owner has decided to lease it for 25 years at a purchase price of $7.9 million. For this reason, the owner will be receiving rent as the return on investment. Therefore, a positive return on investment is a critical measure of a company’s success. Uncertainty is one of main challenges that real estate companies encounter frequently. Virtually all companies require debt to finance their projects and grow profits. Brandywine Realty Trust has been using debt to increase its returns. The company has a debt-to-equity ratio of 1.08. Such a ratio indicates that the company uses more debt to finance its projects. For these reasons, the company will pay more interest, significantly affecting its overall returns on investment or profit. High debt levels and low ROI makes a company a risky investment. For instance, from 2010 to 2020, Brandywine Realty Trust had less than 1% ROI. Such a low return on investment makes the company a risky investment (Wall Street). Similarly, Freedom Office may experience a reduced return on investment, making the company a risky investment. However, Freedom Office has lower risks than Brandywine Realty Trust because it does not use more debt to finance its activities. Therefore, Freedom Office would be a better investment than Brandywine Realty Trust based on investment risk.
Income taxes can significantly affect a company’s total profit or net income. Brandywine Realty Trust has had tax provisions in different amounts over the years. For instance, in 2021, the company’s tax provision was $47,000, while in 2019, its tax provision was $12,000. In 2018, its tax provision was about $423,000. Besides, the company had a negative tax provision of $224,000 in 2020, which means that the company had reduced income. Freedom Office tax exemption from the county, states, and municipal governments was $ 5.2 million for each government in 2019 and 2018. Therefore, both companies have different experiences with tax income, which affects their overall income.
Overall, after considering the two companies, I would invest in Brandywine Realty Trust because the company appears more stable, well-managed, and can become among the leading brands in this sector with some improvement. Besides, the company has maintained positive ROI
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for almost a decade. Although the company has been using debt financing, it has utilized such money to invest in significant projects, resulting in increased revenue. Therefore, I would choose
Brandywine Realty Trust as the best investment option.
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Works Cited
Brandywine Realty Trust. “About Us.” About Us | Brandywine Realty Trust
, https://www.brandywinerealty.com/about-us. Accessed 8 March 2022.
Wall Street. “Read This before Judging Brandywine Realty Trust’s (NYSE:BDN) Roe.” Simply Wall St News
, 14 Dec. 2021, https://simplywall.st/stocks/us/real-estate/nyse-bdn/brandywine-realty-trust/news/read-
this-before-judging-brandywine-realty-trusts-nysebdn-ro. Accessed 8 March 2022.
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