Press Releases

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

WASHINGTON, July 27, 2017 (GLOBE NEWSWIRE) -- Washington Real Estate Investment Trust (“Washington REIT” or the “Company”) (NYSE:WRE), a leading owner and operator of commercial and multifamily properties in the Washington, DC area, reported financial and operating results today for the quarter ended June 30, 2017:

Second Quarter 2017 Highlights

Net income attributable to controlling interests was $7.9 million, or $0.10 per diluted share, compared to $31.8 million, or $0.44 per diluted share in the second quarter of 2016, which included the recognition of a $24.1 million gain from the first sale transaction of the suburban Maryland office portfolio. NAREIT Funds from Operations (FFO) was $37.1 million, or $0.48 per diluted share, compared to $32.9 million, or $0.46 per diluted share, in second quarter 2016. Additional highlights are as below:

• Reported Core FFO of $0.48 per diluted share, compared to $0.46 per diluted share in second quarter 2016
• Grew same-store Net Operating Income (NOI) by 8.8% year-over-year
• Grew same-store NOI by 14.8% for the office, 4.6% for the retail and 2.6% for the multifamily portfolios year-over-year
• Increased same-store economic occupancy by 470 basis points year-over-year to 93.7%
• Raised the mid-point of 2017 Core FFO guidance by two cents per fully diluted share and tightened 2017 Core FFO guidance to a range of $1.80 to $1.84 from $1.76 to $1.84 per fully diluted share
• Raised 2017 same-store NOI growth assumption to range from 5.75% to 6.25% year-over-year, driven by increased office, retail and multifamily same-store NOI year-over-year growth assumptions
• Signed a 131,000 square foot, 15-year lease with the United States Department of Agriculture (USDA) at Braddock Metro Center in Alexandria, VA
• Completed the acquisition of Watergate 600, a 289,000 square foot office building in Washington, DC for $135.0 million

"Washington REIT has delivered strong second-quarter and first half 2017 results. We achieved 9.6% year-over-year same-store NOI growth in the first half of the year, raised our 2017 same-store NOI growth assumptions across all three asset classes, raised our 2017 Core FFO guidance for the second time this year, acquired an iconic DC office asset with strong NAV growth potential, and signed a significant new office lease, thereby addressing all our large, near-term office lease expirations," said Paul T. McDermott, President and Chief Executive Officer. "Our positive momentum is driven by our research-based capital allocation, which has strategically positioned us to capitalize on attractive value-add growth opportunities in the Washington metro region and to generate strong risk-adjusted returns for our shareholders."

Operating Results

The Company's overall portfolio NOI⁽²⁾ was $54.8 million for the quarter ended June 30, 2017, compared to $51.2 million in the corresponding prior year period. Overall portfolio ending occupancy⁽⁵⁾ for the second quarter was at 93.4%, compared to 91.1% at the end of the second quarter last year and 93.5% at the end of first quarter 2017.

Same-store⁽³⁾ portfolio ending occupancy for the second quarter of 2017 was 93.3%, compared to 90.8% at June 30, 2016 and 93.7% at the end of first quarter 2017. Same-store portfolio NOI for the second quarter increased by 8.8%, compared to the corresponding prior year period.

• Office: 51% of Total NOI - Same-store NOI increased by 14.8% compared to the corresponding prior year period, primarily due to 870 basis points of economic occupancy⁽⁶⁾ gains driven by lease commencements, of which approximately 60% occurred at the recently redeveloped Silverline Center with the rest spread across the same-store office portfolio. Periodic settlements of tenant recoveries were also higher. Same-store ending occupancy increased by 610 basis points year-over-year and declined by 10 basis points sequentially to 93.0% primarily due to a tenant move-out that has been re-leased to a cyber security tenant expected to commence in the third quarter. The office portfolio was 94% leased at the end of the second quarter.
  
  
• Retail: 22% of Total NOI - Same-store NOI increased 4.6% compared to the corresponding prior year period, primarily due to 110 basis points of economic occupancy gains driven by lease commencements, as well as lower bad debt expense and lower utilities due to milder weather. Same-store ending occupancy decreased by 70 basis points year-over-year to 91.4%, and by 240 basis points sequentially, primarily due to the previously announced HHGregg bankruptcy as well as the move-out of a large commodity retailer, which has been backfilled by a supermarket chain whose lease commenced in the third quarter. The retail portfolio was 93% leased at the end of the second quarter.
  
  
• Multifamily: 27% of Total NOI - Same-store NOI increased by 2.6% compared to the corresponding prior year period, driven by 180 basis points of rental growth. Same-store effective new lease rent trade-outs increased by 5.6% and same store effective renewal rent trade-outs increased by 3.3% year-over-year. Same-store ending occupancy on a unit basis increased by 80 basis points year-over-year and 60 basis points sequentially to 95.4%. The multifamily portfolio was 98% leased at the end of the second quarter.

Leasing Activity

During the second quarter, Washington REIT signed commercial leases totaling 367,000 square feet, including 228,000 square feet of new leases and 139,000 square feet of renewal leases, as follows (all dollar amounts are on a per square foot basis).

Included in the new office leasing during the quarter, is a 131,000 square foot, 15-year lease with the USDA to backfill the space being vacated by Engility at Braddock Metro Center in Alexandria, VA, an asset that is being redeveloped.

Subsequent to quarter-end, the recently redeveloped Army Navy Building in Washington, DC, leased approximately 17,000 square feet and is now 71% leased.

Acquisition Activity

On April 4, 2017, Washington REIT completed the acquisition of Watergate 600, a 289,000 square foot iconic office building on the Potomac riverfront in Washington, DC for $135.0 million in a transaction that was structured to include the issuance of operating partnership units for a portion of the purchase price.

Capital Update

Year-to-date, the Company issued 2,070,000 shares at an average price of $31.44 per share through the Company’s At-the-Market (ATM) program, raising gross proceeds of $65.1 million to maintain balance sheet strength.

Earnings Guidance

Management is raising the mid-point of 2017 Core FFO guidance by two cents per fully diluted share and tightening 2017 Core FFO guidance to a range of $1.80 to $1.84 from $1.76 to $1.84 per fully diluted share. The following assumptions are incorporated into the tightened guidance range:

• Same-store NOI growth is raised to a projected range of 5.75% to 6.25%, from a previous range of 4.75% to 5.25%
• Same-store office NOI growth is raised to a projected range of 9.0% to 9.5%, from a previous range of 7.25% to 7.75%
• Same-store retail NOI growth is raised to a projected range of 2.5% to 3.0%, from a previous range of 2.0% to 2.5%
• Same-store multifamily NOI growth is raised to a projected range of 3.0% to 3.5%, from a previous range of 2.5% to 3.0%
• The Company's acquisition assumptions currently reflect Watergate 600, although it continues to seek further value-add opportunities
• The Company assumes dispositions of assets ranging from $70 to $100 million, including Walker House, a multifamily asset located in Gaithersburg, MD
• Interest expense is now projected to be approximately $47.5 to $48.0 million considering the acquisition of Watergate 600 and the anticipated timing of the assumed dispositions
• General and administrative expense is now projected to range from $22.0 to $22.5 million
• Non same-store office NOI, which includes Watergate 600, is now projected to range between $18.5 to $19.5 million
• Non same-store multifamily NOI is now projected to range between $13.0 to $13.5 million

Non same-store properties in 2017 consist of Riverside Apartments, a multifamily asset acquired in 2016, The Army Navy Building and Braddock Metro Center, two office assets that are being repositioned in 2017, and Watergate 600, an office asset that was acquired in the second quarter of 2017.

Washington REIT's 2017 Core FFO guidance is based on a number of factors, many of which are outside its control and all of which are subject to change. Washington REIT may change its guidance during the year as actual and anticipated results vary from these assumptions.

2017 Guidance Reconciliation Table ^(a)

A reconciliation of projected net income attributable to the controlling interests per diluted share to projected Core FFO per diluted share for the year ending December 31, 2017 is as follows:

Dividends

On June 30, 2017, Washington REIT paid a quarterly dividend of $0.30 per share.

Washington REIT announced today that its Board of Trustees has declared a quarterly dividend of $0.30 per share to be paid on September 30, 2017 to shareholders of record on September 15, 2017.

Conference Call Information

The Conference Call for Second Quarter Earnings is scheduled for Friday, July 28, 2017 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

The instant replay of the Conference Call will be available until Friday, August 11, 2017, at 11:59 P.M. Eastern Time. Instant replay access information is as follows:                                               

USA Toll Free Number: 1-877-481-4010
International Toll Number: 1-919-882-2331
Conference ID: 10050

The live on-demand webcast of the Conference Call will be available on the Investor section of Washington REIT's website at www.washreit.com. On-line playback of the webcast will be available for two weeks following the Conference Call.

About Washington REIT

Washington REIT is a self-administered, equity real estate investment trust investing in income-producing properties in the greater Washington metro region. Washington REIT owns a diversified portfolio of 50 properties, totaling approximately 6.3 million square feet of commercial space and 4,480 multifamily units, and land held for development.  These 50 properties consist of 20 office properties, 16 retail centers and 14 multifamily properties. Washington REIT shares are publicly traded on the New York Stock Exchange (NYSE:WRE).

Note: Washington REIT's press releases and supplemental financial information are available on the Company website at www.washreit.com or by contacting Investor Relations at (202) 774-3200.

Certain statements in our earnings release and on our conference call are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements in this earnings release preceded by, followed by or that include the words “believe,” “expect,” “intend,” “anticipate,” “potential,” “project,” “will” and other similar expressions. 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, changes in general and local economic and real estate market conditions, the potential for federal government budget reductions, the risk of failure to complete contemplated acquisitions and dispositions, the timing and pricing of lease transactions, the availability and cost of capital, fluctuations in interest rates, tenants' financial conditions, levels of competition, the effect of government regulation, and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2016 Form 10-K and subsequent Quarterly Reports on Form 10-Q. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

(i) Same-Store properties include all stabilized properties that were owned for the entirety of 2017 and the prior  year, and exclude properties under redevelopment or development and properties purchased or sold at any time during 2017 or the prior year. We define redevelopment properties as those for which we expect to spend significant development and construction costs on existing or acquired buildings pursuant to a formal plan which has a current impact on operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. Properties under redevelopment or development are included with the non-same-store properties beginning in the period during which redevelopment or development activities commence. We consider properties to no longer be under redevelopment or development upon substantial completion of redevelopment or development activities, and the earlier of achieving 90% occupancy or two years after substantial completion. For Q2 2017 and Q2 2016, same-store properties exclude: 

Office Acquisition: Watergate 600;
Multifamily Acquisition: Riverside Apartments; and
Office Redevelopment: The Army Navy Building and Braddock Metro Center.

Also excluded from same-store properties in Q2 2017 and Q2 2016 are:
Sold Properties:
Office: 6110 Executive Boulevard, Wayne Plaza, 600 Jefferson Plaza, West Gude Drive, 51 Monroe Street and One Central Plaza.

CONTACT:
Tejal R. Engman
Vice President, Investor Relations
E-Mail:  tengman@washreit.com

Released July 27, 2017