Washington Real Estate Investment Trust Announces Second Quarter Financial and Operating Results

ROCKVILLE, Md.--(BUSINESS WIRE)-- Washington Real Estate Investment Trust (WRIT) (NYSE:WRE) reported financial and operating results today for the quarter ended June 30, 2009:

    --  Net income was $0.23 per diluted share compared to $0.41 per diluted
        share in the same period one year ago. Included in the second quarter
        2009 and second quarter 2008 net income are respective charges of $0.04
        and $0.03 per diluted share from the adoption of an accounting
        pronouncement impacting the accounting of our 3.875% convertible notes
        (1). Also included in the second quarter 2009 and second quarter 2008
        net income are respective gains of $0.12 and $0.32 per diluted share
        related to the sale of real estate. Additionally, second quarter 2009
        net income includes a gain of $0.02 per diluted share related to the
        repurchase of convertible debt.
    --  Funds From Operations (FFO)(2) was $0.53 per diluted share compared to
        $0.54 per diluted share in the same period one year ago. Included in the
        second quarter 2009 FFO is a gain of $0.02 per diluted share related to
        the repurchase of convertible debt.
    --  Guidance for 2009 FFO per diluted share remains unchanged.

Capital Structure

In the second quarter, WRIT issued 5,250,000 common shares at an offering price of $21.40 for proceeds of $112.4 million. WRIT repurchased a total of $40.8 million of its 3.875% convertible notes at an average discounted price of 91% of par for approximately $37 million. In conjunction with these repurchases, WRIT reported a gain of approximately $1.2 million in the second quarter of 2009. During the quarter, WRIT reduced the outstanding balance on its lines of credit by $33 million. Currently the outstanding line balance is $15 million. Also this quarter, WRIT entered into an agreement to modify its $100 million unsecured term loan with Wells Fargo Bank, N.A. to extend the maturity date from February 19, 2010 to November 1, 2011. In May, WRIT completed the sale of Avondale Apartments in Laurel, Maryland for $19.75 million, achieving a net book gain of $6.7 million on the 237 unit Class B property.

On June 30, 2009, WRIT paid a quarterly dividend of $0.4325 per share for its 190th consecutive quarterly dividend at equal or increasing rates.

As of June 30, 2009 WRIT had a total capitalization of $2.6 billion.

WRIT ended the quarter with cash and cash equivalents of $58.4 million. Subsequent to quarter end on July 1, 2009, WRIT used a portion of this cash to prepay a $50 million mortgage that was to mature in October 2009, thus unencumbering five multifamily assets in Virginia: Munson Hill Towers, Country Club Towers, Roosevelt Towers, Park Adams Apartments and The Ashby at McLean. Subsequent to quarter end on July 23, 2009, WRIT completed the sale of the Tech 100 Industrial Park, a three building, 166,000 square foot industrial property in Elkridge, Maryland for $10.54 million and a net book gain of $4.2 million.

Operating Results

Overall portfolio economic occupancy for the second quarter was 92.9%, compared to 92.3% in the same period one year ago and 92.3% in the first quarter of 2009. Overall portfolio Net Operating Income (NOI)(3) was $51.0 million compared to $46.4 million in the same period one year ago and $50.5 million in the first quarter of 2009.

Core(4) portfolio economic occupancy for the second quarter was 93.1%, a decrease of 140 basis points (bps) from the same period one year ago and an increase of 10 bps sequentially from the first quarter of 2009. Core portfolio NOI for the second quarter decreased 2.5% and rental rate growth was 2.1% compared to the same period one year ago.

    --  Multifamily properties' core NOI for the second quarter increased 4.6%
        compared to the same period one year ago, aided by a 2.1% expense
        reduction. Rental rate growth was 1.1% while core economic occupancy
        decreased 110 bps to 92.2%. Sequentially, core economic occupancy
        increased 90 bps from the first quarter of 2009.
    --  Office properties' core NOI for the second quarter decreased 4.3%
        compared to the same period one year ago. Rental rate growth was 2.7%
        while core economic occupancy decreased 150 bps to 92.6%. Sequentially,
        core economic occupancy increased 40 bps from the first quarter of 2009.
    --  Medical office properties' core NOI for the second quarter decreased
        0.8% compared to the same period one year ago. Rental rate growth was
        2.8% while core economic occupancy decreased 120 bps to 96.4%.
        Sequentially, core economic occupancy decreased 60 bps from the first
        quarter of 2009.
    --  Retail properties' core NOI for the second quarter decreased 3.3%
        compared to the same period one year ago. Rental rate growth was 0.5%
        while core economic occupancy decreased 10 bps to 95.0%. Sequentially,
        core economic occupancy decreased 20 bps from the first quarter of 2009.
    --  Industrial properties' core NOI for the second quarter decreased 3.3%
        compared to the same period one year ago. Rental rate growth was 1.9%
        while core economic occupancy decreased 300 bps to 90.2%. Sequentially,
        core economic occupancy decreased 40 bps from the first quarter of 2009.

Leasing Activity

During the second quarter, WRIT signed commercial leases for 558,861 square feet with an average rental rate increase of 13.8% over expiring lease rates, an average lease term of 4.4 years, tenant improvement costs of $8.53 per square foot and leasing costs of $6.46 per square foot.

    --  Rental rates for new and renewed medical office leases increased 7.8% to
        $34.02 per square foot, with $8.54 per square foot in tenant improvement
        costs and $5.67 per square foot in leasing costs.
    --  Rental rates for new and renewed office leases increased 17.6% to $41.03
        per square foot, with $13.12 per square foot in tenant improvement costs
        and $8.08 per square foot in leasing costs.
    --  Rental rates for new and renewed retail leases increased 4.9% to $32.90
        per square foot, with $0.23 per square foot in tenant improvement costs
        and $4.64 per square foot in leasing costs.
    --  Rental rates for new and renewed industrial/flex leases decreased 3.1%
        to $8.01 per square foot, with $1.46 per square foot in tenant
        improvement costs and $4.08 per square foot in leasing costs.

Residential rental rates increased 1.1% in the second quarter compared to the same period one year ago.

In April 2009, WRIT extended its lease with The International Bank for Reconstruction and Development (IBRD), one of the two development institutions that make up the World Bank, at 1776 G Street in Washington, DC. The extension is for approximately 150,000 square feet and commences January 1, 2011 for a 5-year term. The IBRD also occupies an additional 61,000 square feet in the building which expires February 28, 2014.

Other News and Events

Since September 2008, 12 of WRIT's 28 office properties have earned the U.S. Environmental Protection Agency's prestigious Energy Star, the national symbol for superior energy efficiency and environmental protection. This signifies that the buildings' energy performance rates in the top 25 percent of facilities nationwide. The properties awarded the Energy Star in the second quarter of 2009 were 515 King Street, 1700 Research Boulevard, Jefferson Plaza, The Ridges, Wayne Plaza and Parklawn Plaza. Subsequent to quarter end, 40 West Gude, 1220 19th Street and 1776 G Street earned the Energy Star. 1901 Pennsylvania Avenue, Monument II and 6110 Executive Boulevard earned the designation in September 2008, February 2009 and March 2009, respectively.

Conference Call Information

The Conference Call for 2nd Quarter Earnings is scheduled for Friday, July 24, 2009 at 11:00 A.M. Eastern time. Conference Call access information is as follows:


USA Toll Free Number:                1-877-407-9205

International Toll Number:           1-201-689-8054

Leader:                              William T. Camp



The instant replay of the Conference Call will be available until August 7, 2009 at 11:59 P.M. Eastern time. Instant replay access information is as follows:


USA Toll Free Number:                1-877-660-6853

International Toll Number:           1-201-612-7415

Account:                             286

Conference ID:                       325435



The live on-demand webcast of the Conference Call will be available on the Investor section of WRIT's website at www.writ.com. On-line playback of the webcast will be available at http://www.writ.com for two weeks following the Conference Call.

About WRIT

WRIT is a self-administered, self-managed, equity real estate investment trust investing in income-producing properties in the greater Washington metro region. WRIT owns a diversified portfolio of 91 properties consisting of 28 office properties, 21 industrial/flex properties, 17 medical office properties, 14 retail centers, 11 multi-family properties and land for development. WRIT shares are publicly traded on the New York Stock Exchange (NYSE:WRE).

Note: WRIT's press releases and supplemental financial information are available on the company website at www.writ.com or by contacting Investor Relations at (301) 984-9400.

Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to, the effect of the current credit and financial market conditions, the availability and cost of capital, fluctuations in interest rates, tenants' financial conditions, the timing and pricing of lease transactions, levels of competition, the effect of government regulation, the impact of newly adopted accounting principles, changes in general and local economic and real estate market conditions, and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2008 Form 10-K, our first quarter 2009 10-Q and our Form 8-K filed July 10, 2009. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

(1) Financial Accounting Standards Board Staff Position APB14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) ("FSP 14-1"), requires the bifurcation of a component of our 3.875% convertible notes, classification of that component in shareholders' equity, and accretion of the resulting discount on the convertible notes to interest expense. As a result of the adoption of FSP 14-1, equity increased by $21.0 million as of June 30, 2009 and December 31, 2008. The principal balance of our 3.875% convertible notes was reduced by $6.3 million and $12.0 million as of June 30, 2009 and December 31, 2008, respectively, and the unamortized balance of the related loan origination costs was reduced by $2.1 million and $2.7 million, respectively. The decline in principal reflects the unamortized discount balance related to the adoption of FSP 14-1. Interest expense increased $0.9 million in the second quarter of 2009 and $1.3 million in the second quarter of 2008 as a result of the adoption. The gain on extinguishment of debt decreased by $1.5 million for the second quarter of 2009 as a result of the adoption.

(2) Funds From Operations ("FFO") - The National Association of Real Estate Investment Trusts, Inc. ("NAREIT") defines FFO (April, 2002 White Paper) as net income (computed in accordance with generally accepted accounting principles ("GAAP")) excluding gains (or losses) from sales of property plus real estate depreciation and amortization. FFO is a non-GAAP measure and does not replace net income as a measure of performance or net cash provided by operating activities as a measure of liquidity. We consider FFO to be a standard supplemental measure for equity real estate investment trusts ("REITs") because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs.

(3) Net Operating income ("NOI"), defined as real estate rental revenue less real estate expenses, is a non-GAAP measure. We provide NOI as a supplement to net income calculated in accordance with GAAP. As such, it should not be considered an alternative to net income as an indication of our operating performance. It is the primary performance measure we use to assess the results of our operations at the property level. NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain on sale, if any), plus interest expense, depreciation and amortization and general and administrative expenses.

(4) For purposes of evaluating comparative operating performance, we categorize our properties as "core" or "non-core". A core property is one that was owned for the entirety of the periods being evaluated. A non-core property is one that was acquired or placed into service during either of the periods being evaluated.

(5) Funds Available for Distribution ("FAD") is a non-GAAP measure. It is calculated by subtracting from FFO (1) recurring expenditures, tenant improvements and leasing costs that are capitalized and amortized and are necessary to maintain our properties and revenue stream and (2) straight-line rents, then adding (3) non-real estate depreciation and amortization, (4) amortization of restricted share and unit compensation, and adding or subtracting amortization of lease intangibles, as appropriate. We consider FAD to be a measure of a REIT's ability to incur and service debt and to distribute dividends to its shareholders. FAD is a non-standardized measure and may be calculated differently by other REITs.


Economic Occupancy Levels by Core Properties(i)and All Properties

                   Core Properties   All Properties

Sector             2nd QTR  2nd QTR  2nd QTR      2nd QTR

                   2009     2008     2009         2008

Residential        92.2%    93.3%    90.6%   (ii) 81.0%

Office             92.6%    94.1%    93.0%        94.1%

Medical Office     96.4%    97.6%    95.9%        97.2%

Retail             95.0%    95.1%    95.0%        95.1%

Industrial         90.2%    93.2%    90.2%        92.8%

Overall Portfolio  93.1%    94.5%    92.9%        92.3%

(i) Core properties include all properties that were owned for the
entirety of the current and prior year reporting periods. For Q2 2009
and Q2 2008, core properties exclude:

Residential Acquisition: Kenmore Apartments

Office Acquisition: 2445 M Street

Medical Office Acquisition: Sterling Medical Office Building

Retail Acquisitions: none

Industrial Acquisition: none

Also excluded from Core Properties in Q2 2009 and Q2 2008 are Sold
Properties: Sullyfield Center, The Earhart Building, and Avondale
Apartments;

Held for Sale Properties: Charleston Business Center

In Development Properties: Bennett Park, Clayborne Apartments, and
Dulles Station.

(ii) Residential occupancy for all properties reflects the completion of
Bennett Park and Clayborne Apartments. At 6/30/09, 211 of 224 units were
occupied at Bennett Park and 69 of 74 units were occupied at Clayborne
Apartments.




WASHINGTON REAL ESTATE INVESTMENT TRUST

FINANCIAL HIGHLIGHTS

(In thousands, except per share data)

(Unaudited)

                         Three Months Ended June 30,   Six Months Ended June 30,

OPERATING RESULTS          2009         2008             2009         2008

Revenue

Real estate rental       $ 76,729     $ 68,739         $ 154,589    $ 138,085
revenue

Expenses

Real estate expenses       25,686       22,310           53,090       44,988

Depreciation and           23,823       20,995           47,098       41,328
amortization

General and                3,476        3,058            6,658        6,081
administrative

                           52,985       46,363           106,846      92,397

Real estate operating      23,744       22,376           47,743       45,688
income

Other income/(expense):

Interest expense(1)        (19,316 )    (18,840 )        (38,997 )    (37,740 )

Investment income          339          220              659          458

Gain (loss) on
extinguishment of debt     1,219        -                7,064        (8,449  )
(1)

                           (17,758 )    (18,620 )        (31,274 )    (45,731 )

Income from continuing     5,986        3,756            16,469       (43     )
operations

Discontinued
operations:

Income from operations
of properties held for     281          972              698          2,104
sale

Gain on disposal           6,674        15,275           6,674        15,275

Net income                 12,941       20,003           23,841       17,336

Less: Net income
attributable to            (52     )    (53     )        (101    )    (110    )
noncontrolling
interests

Net income attributable
to the controlling       $ 12,889     $ 19,950         $ 23,740     $ 17,226
interests

Income from continuing
operations attributable  $ 5,934      $ 3,703          $ 16,368     $ (153    )
to the controlling
interests

Continuing operations
real estate                23,823       20,995           47,098       41,328
depreciation and
amortization

Funds from continuing    $ 29,757     $ 24,698         $ 63,466     $ 41,175
operations

Income from
discontinued operations    281          972              698          2,104
before gain on sale

Discontinued operations
real estate                7            203              34           395
depreciation and
amortization

Funds from discontinued    288          1,175            732          2,499
operations

Funds from operations    $ 30,045     $ 25,873         $ 64,198     $ 43,674
(2)

Gain on extinguishment     (1,219  )    -                (7,064  )    -
of debt

Tenant improvements        (4,727  )    (5,029  )        (5,793  )    (7,139  )

External and internal
leasing commissions        (2,186  )    (1,429  )        (3,244  )    (3,452  )
capitalized

Recurring capital          (1,984  )    (3,052  )        (3,158  )    (5,168  )
improvements

Straight-line rents,       (515    )    (712    )        (1,179  )    (1,456  )
net

Non-cash fair value        900          1,061            2,028        2,108
interest expense

Non real estate
depreciation &             1,177        1,253            2,396        2,516
amortization of debt
costs

Amortization of lease      (635    )    (537    )        (1,232  )    (1,044  )
intangibles, net

Amortization and
expensing of restricted    927          716              1,504        1,416
share and unit
compensation

Funds available for      $ 21,783     $ 18,144         $ 48,456     $ 31,455
distribution(5)

Note: Certain prior period amounts have been reclassified to conform to the
current presentation.




                         Three Months Ended June 30,   Six Months Ended June 30,

Per share
data
attributable               2009       2008               2009       2008
to the
controlling
interests:

Income from
continuing    (Basic)    $ 0.11     $ 0.08             $ 0.30     $ 0.00
operations

              (Diluted)  $ 0.11     $ 0.08             $ 0.30     $ 0.00

Net income    (Basic)    $ 0.23     $ 0.42             $ 0.43     $ 0.36

              (Diluted)  $ 0.23     $ 0.41             $ 0.43     $ 0.36

Funds from
continuing    (Basic)    $ 0.53     $ 0.52             $ 1.16     $ 0.87
operations

              (Diluted)  $ 0.53     $ 0.51             $ 1.16     $ 0.87

Funds from    (Basic)    $ 0.53     $ 0.54             $ 1.18     $ 0.92
operations

              (Diluted)  $ 0.53     $ 0.54             $ 1.18     $ 0.92

Dividends                $ 0.4325   $ 0.4325           $ 0.8650   $ 0.8550
paid

Weighted
average                    56,276     47,933             54,604     47,278
shares
outstanding

Fully diluted
weighted
average                    56,277     48,033             54,605     47,278
shares
outstanding




WASHINGTON REAL ESTATE INVESTMENT TRUST

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

                                                   June 30,        December 31,

                                                     2009            2008(1)

Assets

Land                                               $ 414,527       $ 414,531

Income producing property                            1,878,406       1,866,221

                                                     2,292,933       2,280,752

Accumulated depreciation and amortization            (440,237  )     (400,487  )

Net income producing property                        1,852,696       1,880,265

Development in progress                              24,140          23,732

Total real estate held for investment, net           1,876,836       1,903,997

Investment in real estate sold or held for sale      3,838           16,408

Cash and cash equivalents                            58,446          11,874

Restricted cash                                      21,038          18,823

Rents and other receivables, net of allowance for    49,219          45,244
doubtful accounts of $5,622 and $6,278

Prepaid expenses and other assets(1)                 100,794         112,599

Other assets related to property sold or held for    200             462
sale

Total assets                                       $ 2,110,371     $ 2,109,407

Liabilities

Notes payable(1)                                   $ 807,128       $ 890,679

Mortgage notes payable                               457,238         421,286

Lines of credit                                      15,000          67,000

Accounts payable and other liabilities               70,772          70,569

Advance rents                                        9,462           9,001

Tenant security deposits                             10,150          10,237

Other liabilities related to property sold or        67              210
held for sale

Total liabilities                                  $ 1,369,817     $ 1,468,982

Shareholders' equity

Shares of beneficial interest, $0.01 par value;
100,000 shares authorized; 58,250 and 52,434         584             526
shares issued and outstanding, respectively

Additional paid-in capital(1)                        901,603         777,375

Distributions in excess of net income                (163,626  )     (138,936  )

Accumulated other comprehensive income               (1,808    )     (2,335    )

Total shareholders' equity                           736,753         636,630

Noncontrolling interests in subsidiaries             3,801           3,795

Total equity                                         740,554         640,425

Total liabilities and equity                       $ 2,110,371     $ 2,109,407

Note: Certain prior year amounts have been reclassified to conform to the
current year presentation.

(1) As adjusted (see Current Report on Form 8-K filed on July 10, 2009)





The following tables contain reconciliations of net income to core net operating
income for the periods presented:

Three months                             Medical
ended June 30,  Multifamily  Office                Retail    Industrial  Total
2009                                     Office

Core net
operating       $ 5,009      $ 18,241    $ 7,329   $ 7,668   $ 7,256     $ 45,503
income(4)

Add: Net
operating
income from       1,900        3,584       56        -         -           5,540
non-core
properties(4)

Total net
operating       $ 6,909      $ 21,825    $ 7,385   $ 7,668   $ 7,256     $ 51,043
income(3)

Add/(deduct):

Other income                                                               339

Interest                                                                   (19,316 )
expense

Gain (loss) on
extinguishment                                                             1,219
of debt

Depreciation
and                                                                        (23,823 )
amortization
expense

General and
administrative                                                             (3,476  )
expenses

Income from
operations of                                                              281
properties
held for sale

Gain on sale                                                               6,674
of real estate

Net income                                                               $ 12,941

Less: Net
income
attributable                                                               (52     )
to the
noncontrolling
interests

Net income
attributable
to the                                                                   $ 12,889
controlling
interests

Three months                             Medical
ended June 30,  Multifamily  Office                Retail    Industrial  Total
2008                                     Office

Core net
operating       $ 4,790      $ 19,067    $ 7,390   $ 7,930   $ 7,504     $ 46,681
income(4)

Add: Net
operating
income from       (131   )     (161   )    40        -         -           (252    )
non-core
properties(4)

Total net
operating       $ 4,659      $ 18,906    $ 7,430   $ 7,930   $ 7,504     $ 46,429
income(3)

Add/(deduct):

Other income                                                               220

Interest                                                                   (18,840 )
expense

Depreciation
and                                                                        (20,995 )
amortization
expense

General and
administrative                                                             (3,058  )
expenses

Income from
operations of                                                              972
properties
held for sale

Gain on sale                                                               15,275
of real estate

Net income                                                               $ 20,003

Less: Net
income
attributable                                                               (53     )
to the
noncontrolling
interests

Net income
attributable
to the                                                                   $ 19,950
controlling
interests

The following tables contain reconciliations of net income to core net operating
income for the periods presented:

Six months                               Medical
ended June 30,  Multifamily  Office                Retail    Industrial  Total
2009                                     Office

Core net
operating       $ 9,669      $ 36,360    $ 14,813  $ 15,375  $ 13,916    $ 90,133
income(4)

Add: Net
operating
income from       3,520        7,155       124       -         567         11,366
non-core
properties(4)

Total net
operating       $ 13,189     $ 43,515    $ 14,937  $ 15,375  $ 14,483    $ 101,499
income(3)

Add/(deduct):

Other income                                                               659

Interest                                                                   (38,997 )
expense

Gain (loss) on
extinguishment                                                             7,064
of debt

Depreciation
and                                                                        (47,098 )
amortization
expense

General and
administrative                                                             (6,658  )
expenses

Income from
operations of                                                              698
properties
held for sale

Gain on sale                                                               6,674
of real estate

Net income                                                               $ 23,841

Less: Net
income
attributable                                                               (101    )
to the
noncontrolling
interests

Net income
attributable
to the                                                                   $ 23,740
controlling
interests

Six months                               Medical
ended June 30,  Multifamily  Office                Retail    Industrial  Total
2008                                     Office

Core net
operating       $ 9,309      $ 38,372    $ 14,615  $ 16,304  $ 14,809    $ 93,409
income(4)

Add: Net
operating
income from       (359   )     (310   )    39        -         318         (312    )
non-core
properties(4)

Total net
operating       $ 8,950      $ 38,062    $ 14,654  $ 16,304  $ 15,127    $ 93,097
income(3)

Add/(deduct):

Other income                                                               458

Interest                                                                   (37,740 )
expense

Gain (loss) on
extinguishment                                                             (8,449  )
of debt

Depreciation
and                                                                        (41,328 )
amortization
expense

General and
administrative                                                             (6,081  )
expenses

Income from
operations of                                                              2,104
properties
held for sale

Gain on sale                                                               15,275
of real estate

Net income                                                               $ 17,336

Less: Net
income
attributable                                                               (110    )
to the
noncontrolling
interests

Net income
attributable
to the                                                                   $ 17,226
controlling
interests




    Source: Washington Real Estate Investment Trust (WRIT)