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 ending June 30,
2008:

    --  Funds from operations (FFO)(1) per diluted share grew 1.8% to
        $0.56 in second quarter 2008 from $0.55 in second quarter
        2007.

    --  Net income for the quarter ending June 30, 2008 was $0.44 per
        diluted share, compared to $0.18 per diluted share in the same
        period one year ago. Net income this quarter included a $15.3
        million gain on disposed assets, related to the sale of
        Sullyfield Commerce Center and The Earhart Building. Net
        income in the second quarter 2007 included $2 million of
        non-recurring administrative charges.

    --  Second quarter 2008 core net operating income increased 1.3%
        and core occupancy increased 30 bps to 94.8% compared to the
        same period one year ago.

    --  Rent increases on commercial lease rollovers in second quarter
        2008 were 18.0%. Residential rental rates increased 1.1% over
        the same period.

    --  Guidance for 2008 FFO per diluted share remains unchanged at
        $2.11 to $2.21, and $2.29 to $2.39 excluding non-recurring
        items.

    Operating Results

Core Net Operating Income (NOI)(2) for second quarter increased 1.3% and rental rate growth was 1.5% compared to the same period last year. Core occupancy was 94.8% during the second quarter of 2008, an increase of 30 bps from the same period in the prior year.

    --  Multifamily properties' core NOI for the second quarter
        increased 2.1% compared to the same period one year ago. Core
        rental rate growth was 1.1% while core economic occupancy
        increased 250 bps to 93.3%.

    --  Retail properties' core NOI for the second quarter increased
        2.0% compared to the same period one year ago. Core rental
        rate growth was 4.1% and core economic occupancy increased 10
        bps to 95.1%.

    --  Office properties' core NOI for the second quarter increased
        1.8% compared to the same period one year ago. Core economic
        occupancy decreased 30 bps to 94.8% and core rental rate
        growth for the office sector was 0.7%.

    --  Medical office properties' core NOI for the second quarter
        increased 1.6%. Core economic occupancy increased 140 bps to
        97.6%. Core rental rate growth for the sector was 0.6%.

    --  Industrial properties' core NOI for the second quarter
        decreased 1.1% compared to the same period one year ago. Core
        rental rate growth was 2.0% and core economic occupancy
        decreased 150 bps to 93.4%.

    Leasing Activity

During the second quarter, WRIT signed commercial leases for 470,000 square feet, with an average rental rate increase of 18.0% and tenant improvement costs of $4.43 per square foot. Residential rental rates increased 1.1% in the second quarter compared to the same period one year ago.

    --  Rental rates for new and renewed retail leases increased
        28.3%, with $0.26 per square foot in tenant improvement costs.

    --  Rental rates for new and renewed medical office leases
        increased 28.2%, with $18.26 per square foot in tenant
        improvement costs.

    --  Rental rates for new and renewed office leases increased
        14.3%, with $6.28 per square foot in tenant improvement costs.

    --  Rental rates for new and renewed industrial/flex leases
        increased 11.3%, with $0.78 per square foot in tenant
        improvement costs.

    Acquisition and Disposition Activity

    --  On May 21, 2008, WRIT acquired Sterling Medical Office
        Building, a 36,000 square foot medical office building located
        in Sterling, Virginia for $6.5 million. Demand for medical
        office space in the area is driven by its proximity to Inova
        Loudoun Hospital and Reston Hospital Center. WRIT expects to
        achieve a first-year, unleveraged yield of 7.6% on a cash
        basis and 7.9% on a GAAP basis. The acquisition was funded
        with cash from operations.

    --  On June 6, 2008, WRIT completed the sale of Sullyfield
        Commerce Center and The Earhart Building, totaling 336,000
        square feet for $41.1 million. The industrial/flex properties,
        located in Chantilly, VA, were acquired in 2001 and 1996,
        respectively. WRIT achieved a net book gain of $15.3 million
        on the sale of the properties and a combined 13.0% unlevered
        internal rate of return during the ownership periods. Proceeds
        from the sale will be reinvested in a 1031 exchange.

    --  On June 16, 2008, WRIT entered into a purchase agreement to
        acquire 2445 M Street, a 290,000 square foot office building
        located in Washington DC, for approximately $182 million. The
        property is 100% leased and strategically positioned between
        Georgetown and the Central Business District in the West End
        submarket of Washington, DC. WRIT anticipates the closing of
        the acquisition will take place no later than the fourth
        quarter of 2008.

    Capital Structure

On May 23, 2008, WRIT raised $90.5 million by issuing 2.6 million common shares at a price of $34.80 per share. WRIT used the net proceeds from the offering to repay borrowings under its lines of credit.

On May 29, 2008, WRIT entered into three mortgage loans with an aggregate principal amount of approximately $81 million. The mortgage loans bear interest at a fixed rate of 5.71% per annum through the maturity date of May 31, 2016. WRIT used the net proceeds of the mortgage loans to repay borrowings under its lines of credit.

On June 30, 2008, WRIT increased its quarterly dividend 2.4% to $0.4325 per share for its 186th consecutive quarterly dividend at equal or increasing rates.

As of June 30, 2008 WRIT had a total capitalization of $2.8 billion.

Other News and Events

On May 15, 2008, WRIT announced the Board of Trustees appointed Wendelin (Wendy) A. White, Esq. and Terence C. Golden to serve as trustees. Both trustees have many years experience in real estate and investments. Wendy White is a partner and serves on the Managing Board at Pillsbury Winthrop Shaw Pittman LLP (Pillsbury), where she is the head of the firm's DC real estate group and has practiced law since 1981. Terence Golden has been Chairman of Bailey Capital Corporation, a private investment company in Washington, D.C. since 2000. Prior to 2000, Mr. Golden was President, Chief Executive Officer and a director of Host Marriott Corporation. He also served as the head of the General Services Administration (GSA) from 1985 to 1988 and as Assistant Secretary of the U.S. Department of the Treasury from 1984 to 1985.

On June 19, 2008, WRIT received the 2008 Workplace Excellence Award from the Alliance for Workplace Excellence. Employers who received the award have demonstrated a commitment to corporate, social, and civic responsibility. The Alliance for Workplace Excellence, (AWE), is a 501(c)3 nonprofit organization founded by Montgomery County, Maryland and Discovery Communication, LLC.

Conference Call Information

The Conference Call for 2nd Quarter Earnings is scheduled for Friday, July 25, 2008 at 2:00 P.M. Eastern Daylight Time. Conference Call access information is as follows:

USA Toll Free Number:      1-877-407-9205
International Toll Number: 1-201-689-8054
Leader:                    Sara Grootwassink

The instant replay of the Conference Call will be available until August 8, 2008 at 11:59 P.M. Eastern Daylight 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:             289430

The live on-demand webcast of the Conference Call will also be available on 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's dividends have increased every year for 38 consecutive years. WRIT's FFO per share has increased every year for 35 consecutive years. WRIT owns a diversified portfolio of 90 properties consisting of 14 retail centers, 26 office properties, 17 medical office properties, 22 industrial/flex properties, 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 and the supplemental disclosures attached hereto 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, fluctuations in interest rates, availability of raw materials and labor costs, levels of competition, the effect of government regulation, the availability of capital, weather conditions, the timing and pricing of lease transactions and 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 2007 Form 10-K. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

(1) 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. 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.

(2) For purposes of evaluating comparative operating performance, we categorize our properties as "core" or "non-core". Core Operating NOI is calculated as real estate rental revenue less real estate operating expenses for those properties owned for the entirety of the periods being evaluated. Core Operating NOI is a non-GAAP measure.

(3) Funds Available for Distribution ("FAD") 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. FAD is included herein, because we consider it 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-GAAP and non-standardized measure, and may be calculated differently by other REITs.


Economic Occupancy Levels by Core Portfolio (i) and All Properties
----------------------------------------------------------------------
                                   Core Portfolio    All Properties
Sector                             2nd QTR 2nd QTR   2nd QTR   2nd QTR
                                    2008    2007    2008        2007
Residential                          93.3%   90.8%   81.0%(ii)   90.8%
Office                               94.8%   95.1%   94.1%       95.0%
Medical Office                       97.6%   96.2%   97.2%       96.3%
Retail                               95.1%   95.0%   95.1%       95.0%
Industrial                           93.4%   94.9%   92.8%       94.0%

Overall Portfolio                    94.8%   94.5%   92.3%       94.4%

(i) Core portfolio properties include all properties that were owned for the entirety of the current and prior year reporting periods. For Q2 2008 and Q2 2007, core portfolio properties exclude:

Office Acquisitions: 2000 M Street, and Woodholme Center;

Medical Office Acquisitions: CentreMed I & II, Ashburn Farm Park, Woodholme Medical Office Building, and Sterling Medical Office Building;

    Retail Acquisitions: none;

    Industrial Acquisitions: 6100 Columbia Pike Dr.

Also excluded from Core Properties in Q2 2008 and Q2 2007 are Sold Properties: Maryland Trade Centers I & II, Sullyfield Center and The Earhart Building; and In Development Properties: Bennett Park, Clayborne Apartments, and 4661 Kenmore Ave.

(ii) Residential occupancy for all properties decreased from 90.8% to 81.0%, primarily due to the completion of Bennett Park and Clayborne Apartments. At 6/30/08, 123 of 224 units were leased at Bennett Park and 27 of 74 units were leased at Clayborne Apartments.


               WASHINGTON REAL ESTATE INVESTMENT TRUST
                         FINANCIAL HIGHLIGHTS
                (In thousands, except per share data)
                             (Unaudited)


                               Three Months Ended   Six Months Ended
                                     June 30,            June 30,
OPERATING RESULTS                2008      2007      2008      2007
------------------------------ --------- --------- --------- ---------
Revenue
    Real estate rental revenue $ 69,768  $ 63,255  $140,046  $123,107

Expenses
    Real estate expenses         22,803    19,542    45,936    38,248
    Depreciation and
     amortization                21,198    16,632    41,723    32,758
    General and administrative    3,111     5,367     6,191     8,250
                               --------- --------- --------- ---------
                                 47,112    41,541    93,850    79,256
                               --------- --------- --------- ---------
Real Estate Operating Income     22,656    21,714    46,196    43,851
Other income/(expense):
    Interest expense            (17,582)  (15,298)  (35,246)  (29,682)
    Loss on Extinguishment of
     Debt                             -         -    (8,449)        -
    Other income                    220       420       458     1,038
    Other income from life
     insurance proceeds               -         -         -     1,303
                               --------- --------- --------- ---------
                                (17,362)  (14,878)  (43,237)  (27,341)
                               --------- --------- --------- ---------


Income from continuing
 operations                       5,294     6,836     2,959    16,510

Discontinued operations:
    Income from operations of
     properties held for sale       639     1,501     1,486     2,539
    Gain on property disposed    15,275         -    15,275         -
                               --------- --------- --------- ---------

Net Income                     $ 21,208  $  8,337  $ 19,720  $ 19,049
                               ========= ========= ========= =========

Income from continuing
 operations                    $  5,294  $  6,836  $  2,959  $ 16,510
Other income from life
 insurance proceeds                   -         -         -    (1,303)
Continuing operations real
 estate depreciation and
 amortization                    21,198    16,632    41,723    32,758
                               --------- --------- --------- ---------
Funds from continuing
 operations                    $ 26,492  $ 23,468  $ 44,682  $ 47,965
                               --------- --------- --------- ---------

Income from discontinued
 operations before gain on
 disposal                           639     1,501     1,486     2,539
Discontinued operations real
 estate depreciation and
 amortization                         -       248         -       897
                               --------- --------- --------- ---------
Funds from discontinued
 operations                         639     1,749     1,486     3,436
                               --------- --------- --------- ---------

Funds from operations(1)       $ 27,131  $ 25,217  $ 46,168  $ 51,401
                               ========= ========= ========= =========


Tenant improvements              (5,029)   (5,185)   (7,139)   (7,346)
External and internal leasing
 commissions capitalized         (1,429)   (1,165)   (3,452)   (3,233)
Recurring capital improvements   (3,052)   (3,425)   (5,168)   (5,361)
Straight-line rents, net           (712)   (1,088)   (1,456)   (2,259)
Non real estate depreciation &
 amortization of debt costs         987       824     1,987     1,574
Amortization of lease
 intangibles, net                  (537)     (280)   (1,044)     (875)
Amortization and expensing of
 restricted share and unit
 compensation                       716     1,574     1,416     2,356
Other                                 -     1,201         -     1,201
                               --------- --------- --------- ---------
Funds Available for
 Distribution (3)              $ 18,075  $ 17,673  $ 31,312  $ 37,458
                               ========= ========= ========= =========

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


                                Three Months Ended  Six Months Ended
                                     June 30,            June 30,
Per Share Data                    2008      2007     2008      2007
--------------------            --------- -------- --------- ---------
Income from
 continuing
 operations          (Basic)    $    0.11 $   0.15 $    0.06   $  0.37
                     (Diluted)  $    0.11 $   0.15 $    0.06   $  0.36
Net income           (Basic)    $    0.44 $   0.18 $    0.42   $  0.42
                     (Diluted)  $    0.44 $   0.18 $    0.42   $  0.42
Funds from
 continuing
 operations          (Basic)    $    0.55 $   0.52 $    0.95   $  1.06
                     (Diluted)  $    0.55 $   0.51 $    0.94   $  1.06
Funds from
 operations          (Basic)    $    0.57 $   0.55 $    0.98   $  1.14
                     (Diluted)  $    0.56 $   0.55 $    0.97   $  1.13

Dividends paid                  $  0.4325 $ 0.4225 $  0.8550   $0.8350

Weighted average
 shares outstanding                47,933   45,490    47,278    45,212
Fully diluted
 weighted average
 shares outstanding                48,148   45,658    47,495    45,407

               WASHINGTON REAL ESTATE INVESTMENT TRUST
                     CONSOLIDATED BALANCE SHEETS
                (In thousands, except per share data)
                             (Unaudited)

                                               June 30,   December 31,
                                                 2008         2007
                                              ----------- ------------
Assets
   Land                                       $  337,680  $   328,951
   Income producing property                   1,693,384    1,635,169
                                              ----------- ------------
                                               2,031,064    1,964,120
   Accumulated depreciation and amortization    (368,200)    (331,991)
                                              ----------- ------------
      Net income producing property            1,662,864    1,632,129
   Development in progress                        58,760       98,321
                                              ----------- ------------
      Total real estate held for investment,
       net                                     1,721,624    1,730,450
   Investment in real estate sold or held for
    sale                                               -       23,843
   Cash and cash equivalents                      12,724       21,488
   Restricted cash                                48,868        6,030
   Rents and other receivables, net of
    allowance for doubtful accounts of $5,585
    and $4,227                                    37,096       36,595
   Prepaid expenses and other assets              85,129       78,517
   Other assets related to property sold or
    held for sale                                      -        1,403
                                              ----------- ------------
         Total Assets                         $1,905,441  $ 1,898,326
                                              =========== ============

Liabilities
   Notes payable                              $  918,834  $   879,123
   Mortgage notes payable                        331,575      252,484
   Lines of credit                                15,000      192,500
   Accounts payable and other liabilities         59,193       63,543
   Advance rents                                   8,793        9,552
   Tenant security deposits                       10,436       10,487
   Other liabilities related to property sold
    or held for sale                                   -          317
                                              ----------- ------------
         Total Liabilities                     1,343,831    1,408,006
                                              ----------- ------------

Minority interest                                  3,791        3,776
                                              ----------- ------------

Shareholders' Equity
   Shares of beneficial interest, $0.01 par
    value; 100,000 shares authorized; 49,461
    and 46,682 shares issued and outstanding,
    respectively                                     496          468
   Additional paid-in capital                    653,816      561,492
   Distributions in excess of net income         (96,873)     (75,416)
   Accumulated other comprehensive income            380            -
                                              ----------- ------------
         Total Shareholders' Equity              557,819      486,544
                                              ----------- ------------
         Total Liabilities and Shareholders'
          Equity                              $1,905,441  $ 1,898,326
                                              =========== ============

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

Source: Washington Real Estate Investment Trust (WRIT)