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)
Released July 24, 2008