Washington Real Estate Investment Trust Announces Third Quarter 2007 Results
ROCKVILLE, Md.--(BUSINESS WIRE)--
Washington Real Estate Investment Trust (WRIT) (NYSE:WRE) reported financial and operating results today for the third quarter ended September 30, 2007:
-- Net income for the quarter ended September 30, 2007 was $34.4
million, or $0.73 per diluted share, compared to $10.2
million, or $0.23 per diluted share in the same period one
year ago. Net income this quarter included a $25.0 million
gain on disposed assets, related to the sale of Maryland Trade
Center I & II.
-- Funds from Operations (FFO) (1) for the quarter ended
September 30, 2007 was $27.7 million, or $0.59 per diluted
share, an increase of $3.3 million, or $0.05 per diluted share
from the same period last year.
Operating Results
Core Net Operating Income (NOI) (3) for the third quarter increased by 6.8%, or $2.5 million, compared to the same period one year ago. The increase in Core NOI is due to rental rate growth of 2.7% and economic occupancy increase of 110 basis points. Rental rate growth was achieved in all sectors; the increase in economic occupancy was primarily achieved in the office sector.
-- Office properties' Core NOI increased 9.8% compared to the
same period one year ago. Economic occupancy increased 290 bps
to 95.5%, mainly due to lease ups at 7900 Westpark, 6110
Executive Boulevard, and Lexington office buildings. Rental
rate growth for the office sector increased 1.9%.
-- Retail properties' Core NOI increased 7.3% compared to the
same period one year ago. Rental rate growth was 2.9%,
primarily due to rate increases at the newly redeveloped
Shoppes at Foxchase, Bradlee Shopping Center, and Frederick
County Square. Economic occupancy increased 110 bps to 95.0%
due to occupancy gains at Montrose Shopping Center.
-- Industrial properties' Core NOI increased 5.4% compared to the
same period one year ago due to rental rate growth of 2.3%.
Economic occupancy increased 20 bps to 94.6% from the same
quarter one year ago.
-- Medical office properties' Core NOI increased 3.9% compared to
the same period one year ago. Rental rate growth was 1.9% and
economic occupancy remains high for the medical office sector
at 99.4%.
-- Multifamily properties' Core NOI increased 3.6% compared to
the same period one year ago. Rental rate growth was 4.9%
while economic occupancy declined 120 bps quarter-over-quarter
to 93.2%, but increased 240 bps sequentially. Rental rate
growth was driven by new leases at 3801 Connecticut Avenue and
Bethesda Hill Apartments.
Core occupancy was 95.3% during the third quarter of 2007, an increase of 110 bps from the same period the prior year.
Leasing Activity
During the third quarter, WRIT signed commercial leases for 323,000 square feet, with an average rental rate increase of 22.6% and tenant improvement costs of $6.36 per square foot. Residential rental rates increased 4.9%.
-- Rental rates for new and renewed retail leases increased
37.2%, with no tenant improvement costs.
-- Rental rates for new and renewed office leases increased
22.7%, with $17.66 per square foot in tenant improvement
costs.
-- Rental rates for new and renewed medical office leases
increased 19.8%, with $18.33 per square foot in tenant
improvement costs.
-- Rental rates for new and renewed industrial/flex leases
increased 15.6%, with $0.88 per square foot in tenant
improvement costs.
Acquisition and Disposition Activity
During the third quarter of 2007, WRIT acquired one medical office property for $15.3 million and land for development. WRIT sold two Class A office buildings for $58.0 million achieving a net gain on sale of $25 million. The acquisitions were financed with borrowings on our line of credit, cash from operations and operating partnership units. The proceeds from the disposition will be reinvested in a 1031 exchange.
-- On August 17, 2007, WRIT acquired CentreMed I & II medical
office buildings, located in Centreville, VA consisting of
52,000 net rentable square feet and 258 parking spaces, for
$15.3 million. The buildings are located off Route
28/Centreville Road near I-66, in close proximity to Inova
Fair Oaks Hospital and Prince William Hospital. Upon
acquisition, the property was 100% leased to 14 tenants and is
expected to achieve a first-year, unleveraged yield of 7.2% on
a cash basis and 7.6% on a GAAP basis.
-- On September 13, 2007, WRIT acquired a 0.8 acre parcel of
land, located at 4661 Kenmore Avenue, Alexandria, VA for
future medical office development. The acquisition was funded
by issuing operating units in a consolidated subsidiary of
WRIT. The land is adjacent to WRIT's Alexandria Professional
Center, one-half mile from Inova Alexandria Hospital and
directly off I-395. WRIT currently has the right to develop
70,000 square feet of office space on the site, but will
pursue a modification of the existing zoning to develop
additional square footage.
-- On September 27, 2007, WRIT completed the sale of Maryland
Trade Center I & II for $58 million. Maryland Trade Center I
is a 16-story, office tower consisting of 190,000 net rentable
square feet. Maryland Trade Center II is a 12-story, office
tower consisting of 160,000 net rentable square feet. WRIT
acquired the office properties on May 17, 1996 for $28 million
and achieved a net book gain on sale of $25 million. The
unlevered internal rate of return was 16.9% over the WRIT
ownership period. Proceeds from the sale will be reinvested in
a 1031 exchange.
Development Activity
-- In July, WRIT completed base construction on Dulles Station, a
180,000 square foot development project of Class A office and
retail space located in Herndon, VA. The building, prominently
visible from the Dulles Toll Road, is part of a mixed-use
development which will include 1,095 multifamily units and
56,000 square feet of retail and restaurant space.
-- This quarter WRIT began delivering units in the mid-rise tower
of Bennett Park, fully delivering all 46 units by quarter-end.
Bennett Park is a ground-up development project in Arlington,
VA consisting of high-rise and mid-rise Class A apartment
buildings with a total of 224 units and 5,900 square feet of
retail space. The mid-rise tower was 70% leased at
quarter-end. Construction is anticipated to be substantially
complete on the high-rise tower in the fourth quarter 2007.
-- Construction is nearing completion at The Clayborne
Apartments. The Clayborne is a ground-up development project
in Alexandria, VA, adjacent to our 800 South Washington retail
property. The project consists of a 74-unit Class A apartment
building that will include 2,600 square feet of additional
retail space. Construction is anticipated to be substantially
complete during the fourth quarter 2007.
Capital Structure
On September 28, 2007, WRIT paid a quarterly dividend of $0.4225 per share for its 183rd consecutive quarterly dividend at equal or increasing rates.
As of September 30, 2007 WRIT had a total capitalization of $2.8 billion.
Earnings Guidance
WRIT is increasing its previously issued 2007 FFO per share guidance from $2.23-$2.26 to $2.28-$2.31.
Conference Call Information
The Conference Call for 3rd Quarter Earnings is scheduled for Thursday, October 25, 2007 at 11:00 A.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 November 25, 2007 at 11:59 PM Eastern Standard Time. Instant Replay access information is as follows:
USA Toll Free Number: 1-877-660-6853 International Toll Number: 1-201-612-7415 Conference ID: 256605
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 metropolitan region. WRIT owns a diversified portfolio of 88 properties consisting of 14 retail centers, 24 office properties, 17 medical office properties, 23 industrial/flex properties, 10 multifamily properties and land for development. WRIT's dividends have increased every year for 37 consecutive years and FFO per share has increased every year for 34 consecutive years. WRIT shares are publicly traded on the New York Stock Exchange (symbol: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 2006 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) 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.
(3) 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.
Economic Occupancy Levels by Core Portfolio (i) and All Properties
----------------------------------------------------------------------
Core Portfolio All Properties
Sector 3rd QTR 3rd QTR 3rd QTR 3rd QTR
2007 2006 2007 2006
Multifamily 93.2% 94.4% 91.5% 94.4%
Office Buildings 95.5% 92.6% 94.3% 92.6%
Medical Office 99.4% 99.5% 99.4% 99.5%
Retail Centers 95.0% 93.9% 95.0% 93.9%
Industrial/Flex Centers 94.6% 94.4% 94.8% 94.4%
Overall Portfolio 95.3% 94.2% 94.8% 94.2%
(i) Core portfolio properties include all properties that were owned for the entirety of the current and prior year reporting periods. For Q3 2007 and Q3 2006, core portfolio properties exclude:
Office Acquisitions: Woodholme Center, Monument II, West Gude Office Park, The Ridges and 6565 Arlington Blvd.
Medical Office Acquisitions: CentreMed I & II, Ashburn Farm Office Park, Woodholme Medical Office Building, 2440 M Street, 15005 Shady Grove Rd and The Crescent;
Retail Acquisitions: none;
Industrial Acquisitions: 270 Technology Park
Also excluded from Core Properties in Q3 2007 and Q3 2006 are Sold Properties: Maryland Trade Centers I & II and In Development Properties: Bennett Park, Clayborne Apartments, and 4661 Kenmore Ave
WASHINGTON REAL ESTATE INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
OPERATING RESULTS 2007 2006 2007 2006
------------------------------ --------- --------- --------- ---------
Revenue
Real estate rental revenue $ 66,028 $ 54,857 $191,028 $155,428
Expenses
Real estate expenses 20,604 17,025 59,319 46,643
Depreciation and
amortization 18,285 13,588 51,543 37,546
General and administrative 3,174 2,230 11,424 10,161
--------- --------- --------- ---------
42,063 32,843 122,286 94,350
--------- --------- --------- ---------
Other (expense) income:
Interest expense (15,824) (12,527) (45,498) (34,453)
Other income 357 293 1,395 637
Other income from life
insurance proceeds - - 1,303 -
--------- --------- --------- ---------
(15,467) (12,234) (42,800) (33,816)
--------- --------- --------- ---------
Income from continuing
operations 8,498 9,780 25,942 27,262
Discontinued operations:
Income from operations of
properties sold or held for
sale 870 450 2,475 1,319
Gain on property disposed 25,022 - 25,022 -
--------- --------- --------- ---------
Net Income $ 34,390 $ 10,230 $ 53,439 $ 28,581
========= ========= ========= =========
Income from continuing
operations $ 8,498 $ 9,780 $ 25,942 $ 27,262
Other income from life
insurance proceeds - - (1,303) -
Continuing operations real
estate depreciation and
amortization 18,285 13,588 51,543 37,546
--------- --------- --------- ---------
Funds from continuing
operations $ 26,783 $ 23,368 $ 76,182 $ 64,808
--------- --------- --------- ---------
Income from discontinued
operations before gain on
disposal 870 450 2,475 1,319
Discontinued operations real
estate depreciation and
amortization - 550 397 1,551
--------- --------- --------- ---------
Funds from discontinued
operations 870 1,000 2,872 2,870
--------- --------- --------- ---------
Funds from operations(1) $ 27,653 $ 24,368 $ 79,054 $ 67,678
========= ========= ========= =========
Tenant improvements (4,215) (2,602) (11,561) (7,330)
External and internal leasing
commissions capitalized (1,159) (1,604) (4,392) (4,041)
Recurring capital improvements (2,635) (2,019) (7,997) (7,037)
Straight-line rents, net (988) (836) (3,247) (2,336)
Non real estate depreciation &
amortization of debt costs 987 640 2,561 1,688
Amortization of lease
intangibles, net (315) 91 (1,190) 87
Amortization and expensing of
restricted share and unit
compensation 882 556 3,238 2,383
Other 102 - 1,303 -
---------------------------------------
Funds Available for
Distribution (2) $ 20,312 $ 18,594 $ 57,769 $ 51,092
========= ========= ========= =========
Certain prior year amounts have been reclassified to conform to the
current presentation.
Three Months Nine Months Ended
Ended September September 30,
30,
Per Share Data 2007 2006 2007 2006
---------------------- ------- ------- ---------- ----------
Income from continuing
operations (Basic) $ 0.18 $ 0.22 $ 0.57 $ 0.63
(Diluted) $ 0.18 $ 0.22 $ 0.57 $ 0.63
Net income (Basic) $ 0.74 $ 0.23 $ 1.17 $ 0.66
(Diluted) $ 0.73 $ 0.23 $ 1.16 $ 0.66
Funds from continuing
operations (Basic) $ 0.57 $ 0.52 $ 1.67 $ 1.50
(Diluted) $ 0.57 $ 0.52 $ 1.66 $ 1.49
Funds from operations (Basic) $ 0.59 $ 0.54 $ 1.73 $ 1.56
(Diluted) $ 0.59 $ 0.54 $ 1.72 $ 1.56
Dividends paid $0.4225 $0.4125 $ 1.2575 $ 1.2275
Weighted average
shares outstanding 46,596 44,874 45,678 43,270
Fully diluted weighted
average shares
outstanding 46,802 45,093 45,877 43,453
WASHINGTON REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
2007 2006
------------- ------------
Assets
Land $ 338,203 $ 288,821
Income producing property 1,522,790 1,264,442
------------- ------------
1,860,993 1,553,263
Accumulated depreciation and amortization (321,840) (277,016)
------------- ------------
Net income producing property 1,539,153 1,276,247
Development in progress (4) 138,093 120,656
------------- ------------
Total investment in real estate, net 1,677,246 1,396,903
Investment in real estate sold or held
for sale - 29,551
Cash and cash equivalents 9,919 8,721
Restricted cash 46,002 4,151
Rents and other receivables, net of
allowance for doubtful accounts of
$5,096 and $3,464, respectively 35,677 31,649
Prepaid expenses and other assets 76,957 58,192
Other assets related to property sold or
held for sale - 2,098
------------- ------------
Total Assets $ 1,845,801 $ 1,531,265
============= ============
Liabilities
Notes payable $ 879,094 $ 728,255
Mortgage notes payable 253,500 237,073
Lines of credit 128,500 61,000
Accounts payable and other liabilities 65,335 45,089
Advance rents 6,561 5,894
Tenant security deposits 10,075 9,231
Other liabilities related to property
sold or held for sale - 1,053
------------- ------------
Total Liabilities 1,343,065 1,087,595
------------- ------------
Minority interest 5,593 1,739
------------- ------------
Shareholders' Equity
Shares of beneficial interest, $.01 par
value; 100,000 shares authorized: 46,669
and 45,042 shares issued and
outstanding, respectively 467 451
Additional paid-in capital 560,695 500,727
Distributions in excess of net income (64,019) (59,247)
------------- ------------
Total Shareholders' Equity 497,143 441,931
------------- ------------
Total Liabilities and Shareholders'
Equity $ 1,845,801 $ 1,531,265
============= ============
Note: Certain prior year amounts have been reclassified to conform to
the current year presentation.
(4) Includes cost of land acquired for development.
Source: Washington Real Estate Investment Trust (WRIT)
Released October 24, 2007