Washington Real Estate Investment Trust Announces Second Quarter 2007 Results
ROCKVILLE, Md.--(BUSINESS WIRE)--
Washington Real Estate Investment Trust (WRIT) (NYSE: WRE) reported financial and operating results today for the second quarter ended June 30, 2007:
-- Net income for the quarter ended June 30, 2007 was $8.3
million, or $0.18 per diluted share, compared to $7.7 million,
or $0.18 per diluted share in the same period one year ago.
-- Funds from Operations (FFO) (1) for the quarter ended June 30,
2007 was $25.2 million, or $0.55 per diluted share, an
increase of $4.5 million, or $0.07 per diluted share from the
same period last year.
Operating Results
Core Net Operating Income (NOI) (3) for the second quarter increased by 3.2%, or $1.1 million, compared to the same period one year ago. The increase in Core NOI is due to rental rate growth of 3.3% and economic occupancy increase of 1.1%. Rental rate growth was achieved in all sectors; the increase in economic occupancy was primarily achieved in the office and industrial sectors.
-- Industrial properties' Core NOI increased 7.4% compared to the
same period one year ago due to rental rate growth of 3.4% and
economic occupancy increasing by 1.4%. Rental rate growth was
primarily achieved by annual rent increases at Northern
Virginia Industrial Park and other industrial properties.
-- General purpose office properties' Core NOI increased 4.9%
compared to the same period one year ago. The gain is
primarily due to increased occupancy, 3.0% higher than the
same period the prior year. Rental rates for the office sector
increased 1.7%.
-- Medical office properties' Core NOI increased 1.3% compared to
the same period one year ago. Rental rate growth was 3.5% and
economic occupancy remains high for the medical office sector
at 98.3%.
-- Multifamily properties' Core NOI increased 1.2% compared to
the same period one year ago. Rental rate increases resulted
in $0.5 million increase in rental rates, or 5.8%, and
economic occupancy increased by 40 bps.
-- Retail properties' Core NOI decreased 1.6% compared to the
same period one year ago. The decrease is primarily due to a
decline in economic occupancy from 99.0% to 96.1%.
Core occupancy was 94.8% during the second quarter of 2007, an increase of 110 bps from the same period the prior year.
Leasing Activity
During the second quarter, WRIT signed commercial leases for 534,000 square feet, with an average rental rate increase of 20.7% and tenant improvements of $6.67 per square foot. Residential rental rates increased 5.8%.
-- Rental rates for new and renewed retail leases increased
40.6%, with $2.27 per square foot in tenant improvement costs.
New and renewed leases at Westminster, Bradlee and Wheaton
shopping centers had the most impact on the increase.
-- Rental rates for new and renewed industrial/flex leases
increased 18.3%, with $3.78 per square foot in tenant
improvement costs. The rental rate increase primarily results
from new and renewed leases at Dulles Business Park and
Pickett Industrial Park.
-- Rental rates for new and renewed medical office leases
increased 17.8%, with $6.04 per square foot in tenant
improvement costs. Leases at Prosperity Medical Center and
15001 Shady Grove Road were mostly responsible for the 17.8%
increase.
-- Rental rates for new and renewed office leases increased
14.4%, with $17.80 per square foot in tenant improvement
costs. New and renewed leases signed at 7900 Westpark Drive
and 6565 Arlington Boulevard were the primary contributors of
the rate increase.
Acquisition Activity
During the second quarter of 2007, WRIT acquired three properties for $72.0 million, including one class A, general purpose office building and two medical office properties. The acquisitions were financed with proceeds from June's equity offering, borrowings on our line of credit, and cash from operations.
-- On June 1, 2007, WRIT acquired Woodholme Medical Office
Building and Woodholme Center, totaling 198,000 net rentable
square feet and 844 parking spaces for $49.0 million. The
properties are located off the Baltimore Beltway (I-695) in
the Pikesville/Owings Mill submarket of Baltimore County,
Maryland. Woodholme Medical Office Building and Woodholme
Center are part of a mixed-use development that includes
retail, restaurants, and a rehabilitation center and are 97%
and 95% leased, respectively.
-- On June 1, 2007, WRIT acquired Ashburn Farm Office Park, a
portfolio consisting of three multi-story medical office
buildings for $23.0 million. The 100% leased portfolio totals
75,400 net rentable square feet and 250 parking spaces. The
buildings are located three miles south of the 155-bed INOVA
Loudoun Hospital in Loudoun County, Virginia, one of the
wealthiest and fastest growing counties in the United States.
Development Activity
At quarter end, three development projects were in progress:
-- Bennett Park, formerly Rosslyn Towers, 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. Construction is
anticipated to be substantially complete on the high-rise
building in fourth quarter 2007 and on the mid-rise in third
quarter 2007.
-- The Clayborne Apartments, formerly South Washington Street, is
a ground-up development project in Alexandria, VA, adjacent to
our 800 South Washington retail property. This project is a
75-unit high-end apartment building that will include 2,600
square feet of additional retail space. Construction is
anticipated to be substantially complete on the building in
third quarter 2007.
-- Phase One of Dulles Station is a 180,000 square foot office
development project located in Herndon, VA. Development is
anticipated to be complete in the third quarter 2007.
Capital Structure
For the 37th consecutive year, WRIT increased its quarterly dividend rate to an indicated annual rate of $1.69 per share for its 182nd consecutive quarterly dividend at equal or increasing rates.
On June 1, 2007, WRIT raised $59 million by issuing 1.6 million common shares at a price of $37 per share. WRIT used the net proceeds from the offerings to repay borrowings under its lines of credit.
On June 29, 2007, WRIT entered into an unsecured revolving credit facility with SunTrust Bank as agent. The facility has a committed capacity of $75 million, improved pricing, and a maturity date of June 29, 2011. The $75 million facility replaces WRIT's unsecured revolving credit facility with SunTrust Bank, which had a committed capacity of $70 million.
On June 29, 2007, WRIT successfully completed its consent solicitation to amend the terms of its outstanding unsecured notes. WRIT requested the modifications due to the restrictive total assets definition; WRIT believes the change to a market based asset definition will more accurately reflect the value of these assets.
As of June 30, 2007 WRIT had a total capitalization of $2.8 billion.
Earnings Guidance
WRIT is maintaining its previously issued 2007 FFO per share guidance of $2.23-$2.26.
Conference Call Information
The Conference Call for 2nd Quarter Earnings is scheduled for Thursday, July 19, 2007 at 10:00 A.M. Eastern Time. Conference Call access information is as follows:
USA Toll Free Number: 1-888-271-8857 International Toll Number: 1-706-679-7697 Leader: Sara Grootwassink Conference ID: 4034714
The instant replay of the Conference Call will be available until August 2, 2007 at 11:59 PM Eastern Time. Instant Replay access information is as follows:
USA Toll Free Number: 1-800-642-1687 International Toll Number: 1-706-645-9291 Conference ID: 4034714
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/Baltimore metropolitan region. WRIT owns a diversified portfolio of 88 properties consisting of 14 retail centers, 26 general purpose office properties, 16 medical office properties, 23 industrial/flex properties, 9 multi-family 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 2nd QTR 2nd QTR 2nd QTR 2nd QTR
2007 2006 2007 2006
Multifamily 90.8%(ii) 90.4% 90.8% 90.4%
Office Buildings 95.6% 92.6% 95.1% 92.4%
Medical Office 98.3% 98.5% 96.1% 98.7%
Retail Centers 96.1% 99.0% 95.1%(iii) 96.1%
Industrial/Flex Centers 94.0% 92.6% 94.0% 92.5%
Overall Portfolio 94.8% 93.7% 94.4% 93.3%
(i) Core portfolio properties include all properties that were owned for the entirety of the current and prior year reporting periods. For Q2 2007 and Q2 2006, core portfolio properties exclude:
Office Acquisitions: Woodholme Center, Monument II, 6565 Arlington Blvd, West Gude Office Park and The Ridges;
Medical Office Acquisitions: Ashburn Farm Office Park, Woodholme Medical Office Building, 2440 M Street, Alexandria Professional Center, 9707 Medical Center Drive, 15001 Shady Grove Rd, Plumtree Medical Center, 15005 Shady Grove Rd and The Crescent;
Retail Acquisitions: Randolph Shopping Center and Montrose Shopping Center, and
Industrial Acquisitions: 270 Technology Park and 9950 Business Parkway.
(ii) Multifamily occupancy level for Q207 is 90.9% without the impact of units off-line for planned renovations. The overall portfolio occupancy was not impacted.
(iii) Montrose Shopping Center was 58% leased when purchased in May 2006.
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 2007 2006 2007 2006
--------------------------------- --------- -------- -------- --------
Revenue
Real estate rental revenue $64,202 $51,351 $125,000 $100,572
Expenses
Real estate expenses 19,756 14,841 38,715 29,618
Depreciation and amortization 16,880 12,462 33,258 23,958
General and administrative 5,367 5,276 8,250 7,931
--------- -------- -------- --------
42,003 32,579 80,223 61,507
--------- -------- -------- --------
Other (expense) income:
Interest expense (15,298) (11,604) (29,674) (21,926)
Other income 420 175 1,038 344
Other income from life
insurance proceeds - - 1,303 -
--------- -------- -------- --------
(14,878) (11,429) (27,333) (21,582)
--------- -------- -------- --------
Income from continuing operations 7,321 7,343 17,444 17,483
Discontinued operations:
Income from operations of
properties sold or held for
sale 1,016 376 1,605 868
--------- -------- -------- --------
Net Income $8,337 $7,719 $19,049 $18,351
========= ======== ======== ========
Income from continuing operations $7,321 $7,343 $17,444 $17,483
Other income from life insurance
proceeds - - (1,303) -
Continuing operations real estate
depreciation and amortization 16,880 12,462 33,258 23,958
--------- -------- -------- --------
Funds from continuing operations $24,201 $19,805 $49,399 $41,441
--------- -------- -------- --------
Income from discontinued
operations before gain on
disposal 1,016 376 1,605 868
Discontinued operations real
estate depreciation and
amortization - 528 397 1,001
--------- -------- -------- --------
Funds from discontinued
operations 1,016 904 2,002 1,869
--------- -------- -------- --------
Funds from operations(1) $25,217 $20,709 $51,401 $43,310
========= ======== ======== ========
Tenant improvements (5,185) (2,033) (7,346) (4,728)
External and internal leasing
commissions capitalized (1,165) (1,477) (3,233) (2,437)
Recurring capital improvements (3,425) (2,724) (5,361) (5,018)
Straight-line rents, net (1,088) (686) (2,259) (1,499)
Non real estate depreciation &
amortization of debt costs 824 554 1,574 1,048
Amortization of lease
intangibles, net (280) (17) (875) (4)
Amortization and expensing of
restricted share and unit
compensation 1,574 1,487 2,356 1,827
Other 1,201 - 1,201 -
------------------------------------
Funds Available for Distribution
(2) $17,673 $15,813 $37,458 $32,499
========= ======== ======== ========
Certain prior year amounts have been reclassified to conform to the current presentation.
Three Months Six Months
Ended June 30, Ended June 30,
Per Share Data 2007 2006 2007 2006
----------------------------- ------- ------- ------- -------
Income from continuing
operations (Basic) $ 0.16 $ 0.17 $ 0.39 $ 0.41
(Diluted) $ 0.16 $ 0.17 $ 0.38 $ 0.41
Net income (Basic) $ 0.18 $ 0.18 $ 0.42 $ 0.43
(Diluted) $ 0.18 $ 0.18 $ 0.42 $ 0.43
Funds from continuing
operations (Basic) $ 0.53 $ 0.46 $ 1.09 $ 0.98
(Diluted) $ 0.53 $ 0.46 $ 1.09 $ 0.97
Funds from operations (Basic) $ 0.55 $ 0.48 $ 1.14 $ 1.02
(Diluted) $ 0.55 $ 0.48 $ 1.13 $ 1.02
Dividends paid $0.4225 $0.4125 $0.8350 $0.8150
Weighted average shares
outstanding 45,490 42,852 45,212 42,454
Fully diluted weighted
average shares outstanding 45,658 43,037 45,407 42,620
WASHINGTON REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
2007 2006
----------- ------------
Assets
Land $ 326,452 $ 288,821
Income producing property 1,474,874 1,264,442
----------- ------------
1,801,326 1,553,263
Accumulated depreciation and amortization (305,647) (277,016)
----------- ------------
Net income producing property 1,495,679 1,276,247
Development in progress (4) 151,393 120,656
----------- ------------
Total investment in real estate, net 1,647,072 1,396,903
Investment in real estate sold or held for
sale 29,341 29,551
Cash and cash equivalents 8,133 8,721
Restricted cash 6,835 4,151
Rents and other receivables, net of
allowance for doubtful accounts of $4,134
and $3,464, respectively 35,435 31,649
Prepaid expenses and other assets 68,439 58,192
Other assets related to properties sold or
held for sale 1,940 2,098
----------- ------------
Total Assets $1,797,195 $1,531,265
=========== ============
Liabilities
Notes payable $ 879,064 $ 728,255
Mortgage notes payable 254,324 237,073
Lines of credit 95,500 61,000
Accounts payable and other liabilities 66,529 45,089
Advance rents 6,666 5,894
Tenant security deposits 10,376 9,231
Other liabilities related to property sold
or held for sale 818 1,053
----------- ------------
Total Liabilities 1,313,277 1,087,595
----------- ------------
Minority interest 1,776 1,739
----------- ------------
Shareholders' Equity
Shares of beneficial interest, $.01 par
value; 100,000 shares authorized: 46,665
and 45,042 shares issued and outstanding,
respectively 467 451
Additional paid-in capital 560,276 500,727
Distributions in excess of net income (78,601) (59,247)
----------- ------------
Total Shareholders' Equity 482,142 441,931
----------- ------------
Total Liabilities and Shareholders'
Equity $1,797,195 $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
Released July 18, 2007