Washington Real Estate Investment Trust
 
 
Second Quarter 2014
 
 
 
 
Supplemental Operating and Financial Data
 
 
Contact:
 
6110 Executive Boulevard
 
 
William T. Camp
 
 Suite 800
 
 
Executive Vice President and
 
Rockville, MD 20852
 
 
Chief Financial Officer
 
 (301) 984-9400
 
 
E-mail: bcamp@writ.com
 
(301) 984-9610 fax
 
 
 
 
 
 
 
 



Company Background and Highlights
Second Quarter 2014


Washington Real Estate Investment Trust ("Washington REIT") is a self-administered, self-managed, equity real estate investment trust investing in income-producing properties in the greater Washington metro region. Washington REIT has a diversified portfolio with investments in office, retail, and multifamily properties and land for development.

In the second quarter, Washington REIT acquired 1775 Eye Street, NW, a 185,000 square foot office building located in Washington's Central Business District, for $104.5 million. Originally built in 1964, 1775 Eye Street is an eleven-story building with a two-level parking garage located at the intersection of 18th and Eye Street, in Northwest DC. The property is currently undergoing its second renovation, which includes a new modernized lobby, common areas, and fitness facility. 1775 Eye Street was originally renovated in 1997 when the owner replaced the facade, storefronts and all of the building systems. 1775 Eye Street is directly across from Farragut West (Blue and Orange Lines) and two blocks from Farragut North (Red Line) Metro Stations.

During the quarter, Washington REIT announced the election of Mr. Benjamin S. Butcher, an additional independent member, to the Board of Trustees. Mr. Butcher currently serves as the Chief Executive Officer, President and Chairman of the Board of Directors of STAG Industrial, Inc. (NYSE: STAG), a publicly traded real estate company focused on acquisition, ownership and management of single tenant industrial properties throughout the United States since its inception in 2011. Mr. Butcher joined the Washington REIT's Board of Trustees effective July 1, 2014.

Washington REIT signed commercial leases totaling 221,889 square feet, including 101,558 square feet of new leases and 120,331 square feet of renewal leases. New leases had an average rental rate increase of 9.0% over expiring lease rates on a GAAP basis and an average lease term of 7.1 years. Commercial tenant improvement costs were $38.86 per square foot and leasing commissions and incentives were $17.84 per square foot for new leases. Renewal leases had an average rental rate increase of 7.3% over expiring lease rates on a GAAP basis and an average lease term of 4.8 years. Commercial tenant improvement costs were $15.76 per square foot and leasing commissions and incentives were $12.84 per square foot for renewal leases.

As of June 30, 2014, Washington REIT owned a diversified portfolio of 54 properties totaling approximately 7 million square feet of commercial space and 2,890 residential units, and land held for development. These 54 properties consist of 25 office properties, 16 retail centers and 13 multifamily properties. Washington REIT shares are publicly traded on the New York Stock Exchange (NYSE: WRE).









Company Background and Highlights
Second Quarter 2014

Net Operating Income Contribution by Sector - Second Quarter 2014



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. 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, the potential for federal government budget reductions, changes in general and local economic and real estate market conditions, 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, the impact of newly adopted accounting principles, and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2013 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.



Supplemental Financial and Operating Data

Table of Contents
June 30, 2014
 
 
 
Schedule
Page
Key Financial Data
 
 
 
 
 
 
 
Capital Analysis
 
 
 
 
 
Portfolio Analysis
 
 
 
 
 
 
Growth and Strategy
 
 
Acquisition and Disposition Summary
 
Tenant Analysis
 
 
 
 
 
 
Appendix
 
 
 




Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended
OPERATING RESULTS
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Real estate rental revenue
$
72,254

 
$
68,611

 
$
66,721

 
$
65,828

 
$
65,915

Real estate expenses
(25,528
)
 
(26,342
)
 
(23,826
)
 
(23,243
)
 
(23,670
)
 
46,726

 
42,269

 
42,895

 
42,585

 
42,245

Real estate depreciation and amortization
(24,401
)
 
(22,753
)
 
(22,412
)
 
(21,168
)
 
(21,037
)
Income from real estate
22,325

 
19,516

 
20,483

 
21,417

 
21,208

Interest expense
(14,985
)
 
(14,530
)
 
(15,629
)
 
(15,930
)
 
(15,824
)
Other income
219

 
223

 
221

 
220

 
246

Acquisition costs
(1,933
)
 
(3,045
)
 
(817
)
 
(148
)
 
(87
)
Gain on sale of real estate
570

 
—

 
—

 
—

 
—

Loss on extinguishment of debt
—

 
—

 
(2,737
)
 
—

 
—

General and administrative
(4,828
)
 
(4,429
)
 
(5,818
)
 
(3,850
)
 
(4,005
)
Income (loss) from continuing operations
1,368

 
(2,265
)
 
(4,297
)
 
1,709

 
1,538

Discontinued operations:
 
 
 
 
 
 
 
 
 
Income from operations of properties sold or held for sale
—

 
546

 
4,256

 
4,131

 
3,725

(Loss) gain on sale of real estate
(288
)
 
106,273

 
18,949

 
—

 
—

(Loss) income from discontinued operations
(288
)
 
106,819

 
23,205

 
4,131

 
3,725

 
 
 
 
 
 
 
 
 
 
Net income
1,080

 
104,554

 
18,908

 
5,840

 
5,263

Less: Net loss from noncontrolling interests
7

 
—

 
—

 
—

 
—

Net income attributable to the controlling interests
$
1,087

 
$
104,554

 
$
18,908

 
$
5,840

 
$
5,263

Per Share Data:
 
 
 
 
 
 
 
 
 
Net income
$
0.02

 
$
1.56

 
$
0.28

 
$
0.09

 
$
0.08

Fully diluted weighted average shares outstanding
66,761

 
66,701

 
66,591

 
66,561

 
66,556

Percentage of Revenues:
 
 
 
 
 
 
 
 
 
Real estate expenses
35.3
%
 
38.4
 %
 
35.7
 %
 
35.3
%
 
35.9
%
General and administrative
6.7
%
 
6.5
 %
 
8.7
 %
 
5.8
%
 
6.1
%
Ratios:
 
 
 
 
 
 
 
 
 
Adjusted EBITDA / Interest expense
2.7
x
 
2.5
x
 
2.6
x
 
2.9
x
 
2.9
x
Income from continuing operations/Total real estate revenue
1.9
%
 
(3.3
)%
 
(6.4
)%
 
2.6
%
 
2.3
%
Net income /Total real estate revenue
1.5
%
 
152.4
 %
 
28.3
 %
 
8.9
%
 
8.0
%
Note: Certain prior quarter amounts have been reclassified to conform to the current quarter presentation.
 
 

4



Medical Office Portfolio
(In thousands)
(Unaudited)

 
 
Three Months Ended
Income from Medical Office Portfolio (1):
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Real estate rental revenue
$
—

 
$
892

 
$
8,651

 
$
12,073

 
$
12,357

Real estate expenses
—

 
(346
)
 
(4,184
)
 
(4,398
)
 
(3,759
)
 
—

 
546

 
4,467

 
7,675

 
8,598

Real estate depreciation and amortization
—

 
—

 
—

 
(3,215
)
 
(4,545
)
Interest expense
—

 
—

 
(211
)
 
(329
)
 
(328
)
Income from operations of Medical Office Portfolio (1)
—

 
546

 
4,256

 
4,131

 
3,725

(Loss) gain on sale of real estate
(288
)
 
106,273

 
18,949

 
—

 
—

Income from discontinued operations
$
(288
)
 
$
106,819

 
$
23,205

 
$
4,131

 
$
3,725

 
 
 
 
 
 
 
 
 
 
 
As of
Investment in Medical Office Portfolio (1):
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Office
$
—

 
$
—

 
$
—

 
$
55,049

 
$
54,902

Medical Office
—

 
—

 
125,967

 
409,486

 
409,040

Total
—

 
—

 
125,967

 
464,535

 
463,942

Less accumulated depreciation
—

 
—

 
(46,066
)
 
(118,378
)
 
(115,796
)
Investment in real estate sold or held for sale, net
$
—

 
$
—

 
$
79,901

 
$
346,157

 
$
348,146

 
 
 
 
 
 
 
 
 
 
Mortgage notes payable secured by Medical Office Portfolio (1)
$
—

 
$
—

 
$
—

 
$
23,467

 
$
23,627

(1) Medical Office Portfolio:
Office - Woodholme Center and 6565 Arlington Boulevard
Medical Office - 2440 M Street, 15001 Shady Grove Road, 15505 Shady Grove Road, 19500 at Riverside Park (formerly Lansdowne Medical Office Building), 9707 Medical Center Drive, CentreMed I and II, 8301 Arlington Boulevard, Sterling Medical Office Building, Shady Grove Medical Village II, Alexandria Professional Center, Ashburn Farm Office Park I, II and III, Woodholme Medical Office Building, Woodburn Medical Park I and II, and Prosperity Medical Center I, II and III
 
Washington REIT entered into four separate contracts with a single buyer to sell all of the held for sale properties (collectively, the "Medical Office Portfolio") for a combined sales price of $500.8 million. The first two separate sale transactions of its medical office portfolio closed on November 21 and November 22, 2013 for an aggregate sales price of $307.2 million. The second two sales transactions closed on January 21, 2014 for an aggregate sales price of $193.6 million.

5



Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Assets
 
 
 
 
 
 
 
 
 
Land
$
519,859

 
$
472,056

 
$
426,575

 
$
418,008

 
$
418,008

Income producing property
1,853,982

 
1,784,850

 
1,675,652

 
1,624,617

 
1,608,939

 
2,373,841

 
2,256,906

 
2,102,227

 
2,042,625

 
2,026,947

Accumulated depreciation and amortization
(600,171
)
 
(581,644
)
 
(565,342
)
 
(548,549
)
 
(531,197
)
Net income producing property
1,773,670

 
1,675,262

 
1,536,885

 
1,494,076

 
1,495,750

Development in progress, including land held for development
83,970

 
68,963

 
61,315

 
55,580

 
51,397

Total real estate held for investment, net
1,857,640

 
1,744,225

 
1,598,200

 
1,549,656

 
1,547,147

Investment in real estate held for sale, net
—

 
—

 
79,901

 
346,157

 
348,146

Cash and cash equivalents
23,009

 
62,080

 
130,343

 
7,923

 
5,919

Restricted cash
11,369

 
107,039

 
9,189

 
7,547

 
10,254

Rents and other receivables, net of allowance for doubtful accounts
55,583

 
52,736

 
48,756

 
48,619

 
49,436

Prepaid expenses and other assets
112,548

 
109,092

 
105,004

 
110,116

 
101,829

Other assets related to properties sold or held for sale
—

 
—

 
4,100

 
18,337

 
18,011

Total assets
$
2,060,149

 
$
2,075,172

 
$
1,975,493

 
$
2,088,355

 
$
2,080,742

Liabilities
 
 
 
 
 
 
 
 
 
Notes payable
$
746,956

 
$
746,830

 
$
846,703

 
$
846,576

 
$
846,450

Mortgage notes payable
406,975

 
404,359

 
294,671

 
290,838

 
288,584

Lines of credit
—

 
—

 
—

 
85,000

 
75,000

Accounts payable and other liabilities
59,719

 
56,804

 
51,742

 
57,116

 
48,836

Advance rents
13,172

 
14,688

 
13,529

 
11,749

 
12,382

Tenant security deposits
8,686

 
8,402

 
7,869

 
7,639

 
7,559

Liabilities related to properties sold or held for sale
—

 
—

 
1,533

 
31,275

 
30,703

Total liabilities
1,235,508

 
1,231,083

 
1,216,047

 
1,330,193

 
1,309,514

Equity
 
 
 
 
 
 
 
 
 
Preferred shares; $0.01 par value; 10,000 shares authorized
—

 
—

 
—

 
—

 
—

Shares of beneficial interest, $0.01 par value; 100,000 shares authorized
666

 
666

 
665

 
665

 
665

Additional paid-in capital
1,152,647

 
1,151,353

 
1,151,174

 
1,148,837

 
1,147,710

Distributions in excess of net income
(331,373
)
 
(312,417
)
 
(396,880
)
 
(395,816
)
 
(381,623
)
Total shareholders' equity
821,940

 
839,602

 
754,959

 
753,686

 
766,752

Noncontrolling interests in subsidiaries
2,701

 
4,487

 
4,487

 
4,476

 
4,476

Total equity
824,641

 
844,089

 
759,446

 
758,162

 
771,228

Total liabilities and equity
$
2,060,149

 
$
2,075,172

 
$
1,975,493

 
$
2,088,355

 
$
2,080,742

Total Debt / Total Market Capitalization
0.40
:1
 
0.42
:1
 
0.42
:1
 
0.43
:1
 
0.41
:1

6



Funds from Operations
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Funds from operations(1)
 
 
 
 
 
 
 
 
 
Net income
$
1,087

 
$
104,554

 
$
18,908

 
$
5,840

 
$
5,263

Real estate depreciation and amortization
24,401

 
22,753

 
22,412

 
21,168

 
21,037

Gain on sale of real estate (classified as continuing operations)
(570
)
 
—

 
—

 
—

 
—

Discontinued operations:
 
 
 
 
 
 
 
 
 
Loss (gain) on sale of real estate
288

 
(106,273
)
 
(18,949
)
 
—

 
—

Real estate depreciation and amortization
—

 
—

 
—

 
3,215

 
4,545

Funds from operations (FFO)
25,206

 
21,034

 
22,371

 
30,223

 
30,845

Loss on extinguishment of debt
—

 
—

 
2,737

 
—

 
—

Real estate impairment
—

 
—

 
92

 
—

 
—

Severance expense
576

 
48

 
2,157

 
250

 
266

Acquisition costs
1,933

 
3,045

 
817

 
148

 
87

Core FFO (1)
$
27,715

 
$
24,127

 
$
28,174

 
$
30,621

 
$
31,198

 
 
 
 
 
 
 
 
 
 
Allocation to participating securities(2)
(17
)
 
(295
)
 
(44
)
 
(109
)
 
(142
)
 
 
 
 
 
 
 
 
 
 
FFO per share - basic
$
0.38

 
$
0.31

 
$
0.34

 
$
0.45

 
$
0.46

FFO per share - fully diluted
$
0.38

 
$
0.31

 
$
0.34

 
$
0.45

 
$
0.46

Core FFO per share - fully diluted
$
0.41

 
$
0.36

 
$
0.42

 
$
0.46

 
$
0.47

 
 
 
 
 
 
 
 
 
 
Common dividend per share
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
 
 
 
 
 
 
 
 
 
Average shares - basic
66,732

 
66,701

 
66,591

 
66,410

 
66,405

Average shares - fully diluted (for FFO and FAD)
66,761

 
66,750

 
66,634

 
66,561

 
66,556

(1)  See "Supplemental Definitions" on page 31 of this supplemental for the definitions of FFO and Core FFO.
(2)  Adjustment to the numerators for FFO and Core FFO per share calculations when applying the two-class method for calculating EPS.


7



Funds Available for Distribution
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Funds available for distribution(1)
 
 
 
 
 
 
 
 
 
FFO
$
25,206

 
$
21,034

 
$
22,371

 
$
30,223

 
$
30,845

Non-cash loss on extinguishment of debt
—

 
—

 
88

 
—

 
—

Tenant improvements
(7,970
)
 
(4,899
)
 
(7,717
)
 
(3,957
)
 
(5,918
)
Leasing commissions and incentives
(3,363
)
 
(1,640
)
 
(6,083
)
 
(3,746
)
 
(2,342
)
Recurring capital improvements
(1,610
)
 
(888
)
 
(1,953
)
 
(1,917
)
 
(2,311
)
Straight-line rent, net
(723
)
 
(353
)
 
(353
)
 
(578
)
 
(483
)
Non-cash fair value interest expense
30

 
195

 
256

 
255

 
255

Non-real estate depreciation and amortization
904

 
872

 
906

 
939

 
933

Amortization of lease intangibles, net
677

 
239

 
219

 
129

 
86

Amortization and expensing of restricted share and unit compensation
1,429

 
1,041

 
2,623

 
1,215

 
1,355

Real estate impairment
—

 
—

 
92

 
—

 
—

Funds available for distribution (FAD)
14,580

 
15,601

 
10,449

 
22,563

 
22,420

Cash loss on extinguishment of debt
—

 
—

 
2,649

 
—

 
—

Non-share-based severance expense
517

 
48

 
1,537

 
—

 
—

Acquisition costs
1,933

 
3,045

 
817

 
148

 
87

Core FAD (1)
$
17,030

 
$
18,694

 
$
15,452

 
$
22,711

 
$
22,507

 
 
 
 
 
 
 
 
 
 
Allocation to participating securities(2)
(17
)
 
(295
)
 
(44
)
 
(109
)
 
(142
)
 
 
 
 
 
 
 
 
 
 
FAD per share - basic
$
0.22

 
$
0.23

 
$
0.16

 
$
0.34

 
$
0.34

FAD per share - fully diluted
$
0.22

 
$
0.23

 
$
0.16

 
$
0.34

 
$
0.33

Core FAD per share - fully diluted
$
0.25

 
$
0.28

 
$
0.23

 
$
0.34

 
$
0.34

 
 
 
 
 
 
 
 
 
 
Common dividend per share
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
 
 
 
 
 
 
 
 
 
Average shares - basic
66,732

 
66,701

 
66,591

 
66,410

 
66,405

Average shares - fully diluted (for FFO and FAD)
66,761

 
66,750

 
66,634

 
66,561

 
66,556

(1)  See "Supplemental Definitions" on page 31 of this supplemental for the definitions of FAD and Core FAD.
(2)  Adjustment to the numerators for FAD and Core FAD per share calculations when applying the two-class method for calculating EPS.


8



Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
(In thousands)
(Unaudited)
 

 
Three Months Ended
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Adjusted EBITDA (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
1,087

 
$
104,554

 
$
18,908

 
$
5,840

 
$
5,263

Add:
 
 
 
 
 
 
 
 
 
Interest expense, including discontinued operations
14,985

 
14,530

 
15,840

 
16,259

 
16,152

Real estate depreciation and amortization, including discontinued operations
24,401

 
22,753

 
22,412

 
24,383

 
25,582

Income tax expense
71

 
—

 
(25
)
 
6

 
24

Real estate impairment
—

 
—

 
92

 
—

 
—

Non-real estate depreciation
180

 
193

 
196

 
203

 
215

Less:
 
 
 
 
 
 
 
 
 
    Net gain on sale of real estate
(282
)
 
(106,273
)
 
(18,949
)
 
—

 
—

    Loss on extinguishment of debt
—

 
—

 
2,737

 
—

 
—

Adjusted EBITDA
$
40,442

 
$
35,757

 
$
41,211

 
$
46,691

 
$
47,236

 
 
 
 
 
 
 
 
 
 
(1) Adjusted EBITDA is earnings before interest expense, taxes, depreciation, amortization, gain on sale of real estate, real estate impairment, gain/loss on extinguishment of debt and gain from non-disposal activities. We consider Adjusted EBITDA to be an appropriate supplemental performance measure because it permits investors to view income from operations without the effect of depreciation, the cost of debt or non-operating gains and losses. Adjusted EBITDA is a non-GAAP measure.



9



Long Term Debt Analysis
($'s in thousands)
 

 
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Balances Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured (1)
 
 
 
 
 
 
 
 
 
Conventional fixed rate
$
406,975

 
$
404,359

 
$
294,671

 
$
314,305

 
$
312,211

Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds and notes
746,956

 
746,830

 
846,703

 
846,576

 
846,450

Credit facility
—

 
—

 
—

 
85,000

 
75,000

Unsecured total
746,956

 
746,830

 
846,703

 
931,576

 
921,450

Total
$
1,153,931

 
$
1,151,189

 
$
1,141,374

 
$
1,245,881

 
$
1,233,661

 
 
 
 
 
 
 
 
 
 
Average Interest Rates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Conventional fixed rate
5.3
%
 
5.4
%
 
6.1
%
 
6.1
%
 
6.1
%
Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds
4.9
%
 
4.9
%
 
4.9
%
 
4.9
%
 
4.9
%
Credit facilities
—
%
 
—
%
 
—
%
 
1.4
%
 
1.4
%
Unsecured total
4.9
%
 
4.9
%
 
4.9
%
 
4.6
%
 
4.6
%
Average
5.0
%
 
5.0
%
 
5.2
%
 
5.0
%
 
5.0
%

Note: The current balances outstanding of the secured and unsecured fixed rate bonds and notes are shown net of discounts/premiums in the amount of $4.0 million and $3.0 million, respectively.

(1) For periods prior to December 31, 2013, the secured balances outstanding include mortgage notes payable which have been reclassified to 'Liabilities related to properties sold or held for sale' on the consolidated balance sheets. These mortgage notes payable, secured by Woodholme Medical Center, Ashburn Farm Office Park I, Ashburn Farm Office Park III, were repaid in November 2013. See Medical Office Portfolio Supplemental page 5 for detail by quarter.


    

10


Long Term Debt Maturities
(in thousands, except average interest rates)
 
, except per share data)
 
Future Maturities of Debt
Year
Secured Debt
 
Unsecured Debt
 
Credit Facilities
 
Total Debt
 
Avg Interest Rate
2014
$
—

 
$
—

 
$
—

 
$
—

 

2015
—

 
150,000

 
—

 
150,000

 
5.4%
2016
145,810

 
—

 
—

 
145,810

 
5.4%
2017
150,903

 
—

 
—

 
150,903

 
5.9%
2018
—

 
—

 
—

 
—

 

2019
31,280

 
—

 
—

 
31,280

 
5.4%
2020
—

 
250,000

 
—

 
250,000

 
5.1%
2021
—

 
—

 
—

 
—

 

2022
44,517

 
300,000

 
—

 
344,517

 
4.0%
2023
—

 
—

 
—

 
—

 

2024
—

 
—

 
—

 
—

 
 
Thereafter
—

 
50,000

 
—

 
50,000

 
7.4%
Scheduled principal payments
$
372,510

 
$
750,000

 
$
—

 
$
1,122,510

 
5.1%
Scheduled amortization payments
30,505

 
—

 
—

 
30,505

 
4.7%
Net discounts/premiums
3,960

 
(3,044
)
 
—

 
916

 
 
Total maturities
$
406,975

 
$
746,956

 
$
—

 
$
1,153,931

 
5.0%
Weighted average maturity =5.5 years

11



Debt Covenant Compliance
 

 
Unsecured Notes Payable
 
Unsecured Line of Credit #1
($100.0 million)
 
Unsecured Line of Credit #2
($400.0 million)
 
Quarter Ended June 30, 2014
 
Covenant
 
Quarter Ended June 30, 2014
 
Covenant
 
Quarter Ended June 30, 2014
 
Covenant
% of Total Indebtedness to Total Assets(1)
42.6
%
 
≤ 65.0%
 
 N/A

 
N/A
 
 N/A

 
N/A
Ratio of Income Available for Debt Service to Annual Debt Service
2.9

 
            ≥ 1.5
 
 N/A

 
N/A
 
 N/A

 
N/A
% of Secured Indebtedness to Total Assets(1)
15.0
%
 
≤ 40.0%
 
 N/A

 
N/A
 
 N/A

 
N/A
Ratio of Total Unencumbered Assets(2) to Total Unsecured Indebtedness
2.8

 
            ≥ 1.5
 
 N/A

 
N/A
 
 N/A

 
N/A
Tangible Net Worth(3)
 N/A

 
N/A
 
$868.0 million

 
≥ $673.4 million
 
$869.2 million

 
≥ $671.9 million
% of Total Liabilities to Gross Asset Value(5)
 N/A

 
N/A
 
50.2
%
 
≤ 60.0%
 
50.2
%
 
≤ 60.0%
% of Secured Indebtedness to Gross Asset Value(5)
 N/A

 
N/A
 
16.5
%
 
≤ 35.0%
 
16.5
%
 
≤ 35.0%
Ratio of EBITDA(4) to Fixed Charges(6)
 N/A

 
N/A
 
2.56

 
             ≥ 1.50
 
2.56

 
             ≥ 1.50
Ratio of Unencumbered Pool Value(7) to Unsecured Indebtedness
 N/A

 
N/A
 
2.58

 
             ≥ 1.67
 
2.58

 
             ≥ 1.67
Ratio of Unencumbered Net Operating Income to Unsecured Interest Expense
 N/A

 
N/A
 
3.51

 
             ≥ 2.00
 
3.51

 
             ≥ 2.00
Ratio of Investments(8) to Gross Asset Value(5)
 N/A

 
N/A
 
5.1
%
 
≤ 15.0%
 
5.1
%
 
≤ 15.0%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Total Assets is calculated by applying a capitalization rate of 7.50% to the EBITDA(4) from the last four consecutive quarters, excluding EBITDA from acquired, disposed, and non-stabilized development properties.
(2) Total Unencumbered Assets is calculated by applying a capitalization rate of 7.50% to the EBITDA(4) from unencumbered properties from the last four consecutive quarters, excluding EBITDA from acquired, disposed, and non-stabilized development properties.
(3) Tangible Net Worth is defined as shareholders equity less accumulated depreciation at the commitment start date plus current accumulated depreciation.
(4) EBITDA is defined in our debt covenants as earnings before minority interests, depreciation, amortization, interest expense, income tax expense, and extraordinary and nonrecurring gains and losses.
(5) Gross Asset Value is calculated by applying a capitalization rate to the annualized EBITDA(4) from the most recently ended quarter, excluding EBITDA from disposed properties and current quarter acquisitions. To this amount, the purchase price of current quarter acquisitions, cash and cash equivalents and development in progress is added.
(6) Fixed Charges consist of interest expense, principal payments, ground lease payments and replacement reserve payments.
(7) Unencumbered Pool Value is calculated by applying a capitalization rate of 7.50% to the net operating income from unencumbered properties owned for the entire quarter. To this we add the purchase price of unencumbered acquisitions during the current quarter.
(8) Investments is defined as development in progress, including land held for development, plus budgeted development costs upon commencement of construction, if any.

12


        

Capital Analysis
(In thousands, except per share amounts)
 
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Market Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares Outstanding
66,636

 
66,630

 
66,531

 
66,500

 
66,500

Market Price per Share
$
25.98

 
$
23.88

 
$
23.36

 
$
25.27

 
$
26.91

Equity Market Capitalization
$
1,731,203

 
$
1,591,124

 
$
1,554,164

 
$
1,680,455

 
$
1,789,515

 
 
 
 
 
 
 
 
 
 
Total Debt
$
1,153,931

 
$
1,151,189

 
$
1,141,374

 
$
1,245,881

 
$
1,233,661

Total Market Capitalization
$
2,885,134

 
$
2,742,313

 
$
2,695,538

 
$
2,926,336

 
$
3,023,176

 
 
 
 
 
 
 
 
 
 
Total Debt to Market Capitalization
0.40
:1
 
0.42
:1
 
0.42
:1
 
0.43
:1
 
0.41
:1
 
 
 
 
 
 
 
 
 
 
Earnings to Fixed Charges(1)
1.1x

 
0.8x

 
0.7x

 
1.1x

 
1.1x

Debt Service Coverage Ratio(2)
2.5x

 
2.3x

 
2.5x

 
2.7x

 
2.8x

 
 
 
 
 
 
 
 
 
 
Dividend Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Dividends Paid
$
20,042

 
$
20,092

 
$
19,972

 
$
20,033

 
$
20,065

Common Dividend per Share
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

Payout Ratio (Core FFO per share basis)
73.2
%
 
83.3
%
 
71.4
%
 
65.2
%
 
63.8
%
Payout Ratio (Core FAD per share basis)
120.0
%
 
107.1
%
 
130.4
%
 
88.2
%
 
88.2
%
Payout Ratio (FAD per share basis)
136.4
%
 
130.4
%
 
187.5
%
 
88.2
%
 
90.9
%
 
 
 
 
 
 
 
 
 
 
(1) The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings consist of income from continuing operations attributable to the controlling interests plus fixed charges, less capitalized interest. Fixed charges consist of interest expense, including amortized costs of debt issuance, plus interest costs capitalized.
(2) Debt service coverage ratio is computed by dividing Adjusted EBITDA (see page 9) by interest expense and principal amortization.


13



Same-Store Portfolio Net Operating Income (NOI) Growth & Rental Growth
2014 vs. 2013
 

 
Three Months Ended June 30,
 
 
 
 
 
2014
 
2013
 
% Change
 
Rental Rate Growth
Cash Basis:
 
 
 
 
 
 
 
Multifamily
$
7,765

 
$
7,755

 
0.1
 %
 
(0.3
)%
Office
23,080

 
21,318

 
8.3
 %
 
1.0
 %
Retail
11,430

 
10,785

 
6.0
 %
 
0.1
 %
Overall Same-Store Portfolio (1)
$
42,275

 
$
39,858

 
6.1
 %
 
0.5
 %
 
 
 
 
 
 
 
 
GAAP Basis:
 
 
 
 
 
 
 
Multifamily
$
7,774

 
$
7,893

 
(1.5
)%
 
(0.3
)%
Office
23,212

 
21,496

 
8.0
 %
 
1.4
 %
Retail
11,517

 
10,668

 
8.0
 %
 
0.4
 %
Overall Same-Store Portfolio (1)
$
42,503

 
$
40,057

 
6.1
 %
 
0.8
 %

(1)  Non same-store properties were:
Acquisitions:
Multifamily - The Paramount and Yale West
Office - The Army Navy Club Building and 1775 Eye Street
Redevelopment:
         Office - 7900 Westpark Drive
Sold properties classified as continuing operations:
Retail - 5740 Columbia Road (parcel of land at Gateway Overlook)
Sold properties classified as discontinued operations:
Medical Office/Office - The Medical Office Portfolio (see Supplemental Definitions on page 31 for list of properties included in the Medical Office Portfolio)


14



Same-Store Portfolio Net Operating Income (NOI) Detail
(In thousands)
 
 
Three Months Ended June 30, 2014
 
Multifamily
 
Office
 
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
13,226

 
$
36,374

 
 
$
14,748

 
$
—

 
$
64,348

Non same-store - acquired and in development (1)
2,393

 
5,502

 
 
11

 
—

 
7,906

Total
15,619

 
41,876

 
 
14,759

 
—

 
72,254

Real estate expenses
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
5,452

 
13,162

 
 
3,231

 
—

 
21,845

Non same-store - acquired and in development (1)
1,022

 
2,655

 
 
6

 
—

 
3,683

Total
6,474

 
15,817

 
 
3,237

 
—

 
25,528

Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
7,774

 
23,212

 
 
11,517

 
—

 
42,503

Non same-store - acquired and in development (1)
1,371

 
2,847

 
 
5

 
—

 
4,223

Total
$
9,145

 
$
26,059

 
 
$
11,522

 
$
—

 
$
46,726

 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI GAAP basis (from above)
$
7,774

 
$
23,212

 
 
$
11,517

 
$
—

 
$
42,503

Straight-line revenue, net for same-store properties
—

 
(475
)
 
 
(99
)
 
—

 
(574
)
FAS 141 Min Rent
(9
)
 
101

 
 
(52
)
 
—

 
40

Amortization of lease intangibles for same-store properties
—

 
242

 
 
64

 
—

 
306

Same-store portfolio NOI, cash basis
$
7,765

 
$
23,080

 
 
$
11,430

 
$
—

 
$
42,275

Reconciliation of NOI to net income
 
 
 
 
 
 
 
 
 
 
Total NOI
$
9,145

 
$
26,059

 
 
$
11,522

 
$
—

 
$
46,726

Depreciation and amortization
(5,123
)
 
(15,938
)
 
 
(3,124
)
 
(216
)
 
(24,401
)
General and administrative
—

 
—

 
 
—

 
(4,828
)
 
(4,828
)
Interest expense
(2,297
)
 
(3,005
)
 
 
(252
)
 
(9,431
)
 
(14,985
)
Other income
—

 
—

 
 
—

 
219

 
219

Acquisition costs
—

 
—

 
 
—

 
(1,933
)
 
(1,933
)
    Gain on sale of real estate
—

 
—

 
 
—

 
570

 
570

Discontinued operations:
 
 
 
 
 
 
 
 
 
 
Loss on sale of real estate (1)
—

 
—

 
 
—

 
(288
)
 
(288
)
Net income (loss)
1,725

 
7,116

 
 
8,146

 
(15,907
)
 
1,080

Net loss attributable to noncontrolling interests
—

 
—

 
 
—

 
7

 
7

Net income (loss) attributable to the controlling interests
$
1,725

 
$
7,116

 
 
$
8,146

 
$
(15,900
)
 
$
1,087

(1)  For a list of non-same-store properties and held for sale and sold properties, see page 14 of this Supplemental.
 
 

15



Same-Store Net Operating Income (NOI) Detail
(In thousands)
 
 
Three Months Ended June 30, 2013
 
Multifamily
 
Office
 
Medical Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
13,399

 
$
34,838

 
$
—

 
$
14,248

 
$
—

 
$
62,485

Non same-store - acquired and in development (1)
—

 
3,397

 
—

 
33

 
—

 
3,430

                         Total
13,399

 
38,235

 
—

 
14,281

 
—

 
65,915

 
 
 
 
 
 
 
 
 
 
 
 
Real estate expenses
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
5,506

 
13,342

 
—

 
3,580

 
—

 
22,428

Non same-store - acquired and in development (1)
—

 
1,239

 
—

 
3

 
—

 
1,242

                         Total
5,506

 
14,581

 
—

 
3,583

 
—

 
23,670

 
 
 
 
 
 
 
 
 
 
 
 
Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
7,893

 
21,496

 
—

 
10,668

 
—

 
40,057

Non same-store - acquired and in development (1)
—

 
2,158

 
—

 
30

 
—

 
2,188

                          Total
$
7,893

 
$
23,654

 
$
—

 
$
10,698

 
$
—

 
$
42,245

 
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI GAAP basis (from above)
$
7,893

 
$
21,496

 
$
—

 
$
10,668

 
$
—

 
$
40,057

Straight-line revenue, net for same-store properties


 
(361
)
 
—

 
139

 
—

 
(222
)
FAS 141 Min Rent
(138
)
 
54

 
—

 
(80
)
 
—

 
(164
)
Amortization of lease intangibles for same-store properties
—

 
129

 
—

 
58

 
—

 
187

Same-store portfolio NOI, cash basis
$
7,755

 
$
21,318

 
$
—

 
$
10,785

 
$
—

 
$
39,858

 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of NOI to net income
 
 
 
 
 
 
 
 
 
 
 
Total NOI
$
7,893

 
$
23,654

 
$
—

 
$
10,698

 
$
—

 
$
42,245

Depreciation and amortization
(2,967
)
 
(14,377
)
 
—

 
(3,407
)
 
(286
)
 
(21,037
)
General and administrative
—

 
—

 
—

 
—

 
(4,005
)
 
(4,005
)
Interest expense
(1,687
)
 
(2,569
)
 
—

 
(270
)
 
(11,298
)
 
(15,824
)
Other income
—

 
—

 
—

 
—

 
246

 
246

Acquisition costs
—

 
—

 
—

 
—

 
(87
)
 
(87
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
Income from operations of properties sold or held for sale (1)
—

 
286

 
3,439

 
—

 
—

 
3,725

Net income (loss)
3,239

 
6,994

 
3,439

 
7,021

 
(15,430
)
 
5,263

Net income attributable to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

Net income (loss) attributable to the controlling interests
$
3,239

 
$
6,994

 
$
3,439

 
$
7,021

 
$
(15,430
)
 
$
5,263

(1)  For a list of non-same-store properties and held for sale and sold properties, see page 14 of this Supplemental.
 
 

16



Net Operating Income (NOI) by Region
 
 
 
 
 
 
 
 
Washington REIT Portfolio
 
Washington REIT Portfolio
Maryland/Virginia/DC
 
Inside & Outside the Beltway
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of GAAP NOI
 
 
Percentage of GAAP NOI
 
Q2 2014
 
YTD 2014
 
 
Q2 2014
 
YTD 2014
DC
 
 
 
 
Inside the Beltway
 
 
Multifamily
5.4
%
 
5.0
%
 
Multifamily
18.7
%
 
18.9
%
Office
25.6
%
 
24.1
%
 
Office
36.5
%
 
35.2
%
Retail
0.8
%
 
0.8
%
 
Retail
7.7
%
 
7.7
%
 
31.8
%
 
29.9
%
 
 
62.9
%
 
61.8
%
Maryland
 
 
 
 
Outside the Beltway
 
 
Multifamily
2.6
%
 
2.7
%
 
Multifamily
0.9
%
 
1.0
%
Office
10.5
%
 
10.5
%
 
Office
19.2
%
 
20.3
%
Retail
17.1
%
 
17.0
%
 
Retail
17.0
%
 
16.9
%
 
30.2
%
 
30.2
%
 
 
37.1
%
 
38.2
%
Virginia
 
 
 
 
 


 


Multifamily
11.5
%
 
12.1
%
 
Total Portfolio
100.0
%
 
100.0
%
Office
19.8
%
 
21.0
%
 
 
 
 
 
Retail
6.7
%
 
6.8
%
 
 
 
 
 
 
38.0
%
 
39.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Portfolio
100.0
%
 
100.0
%
 
 
 
 
 



17



Same-Store and Overall Physical Occupancy Levels by Sector

 

 
 
Physical Occupancy - Same-Store Properties (1)
Sector
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Multifamily
 
94.3
%
 
92.7
%
 
92.6
%
 
94.1
%
 
93.1
%
Office
 
90.6
%
 
86.9
%
 
86.6
%
 
86.6
%
 
86.4
%
Retail
 
94.2
%
 
93.6
%
 
91.3
%
 
91.4
%
 
93.2
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
92.6
%
 
90.2
%
 
89.4
%
 
89.8
%
 
90.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Physical Occupancy - All Properties
Sector
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Multifamily
 
93.7
%
 
92.2
%
 
92.1
%
 
94.1
%
 
93.1
%
Office
 
86.2
%
 
83.7
%
 
85.7
%
 
86.1
%
 
86.3
%
Medical Office
 
—
%
 
—
%
 
89.0
%
 
84.6
%
 
84.8
%
Retail
 
94.2
%
 
93.6
%
 
91.3
%
 
91.4
%
 
93.2
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
90.1
%
 
88.4
%
 
88.8
%
 
88.7
%
 
89.1
%

(1)  Non same-store properties were:
Acquisitions:
Multifamily - The Paramount and Yale West
    Office - The Army Navy Club Building and 1775 Eye Street
Redevelopment:
     Office - 7900 Westpark Drive
Sold properties classified as continuing operations:
Retail - 5740 Columbia Road (parcel of land at Gateway Overlook)
Sold properties classified as discontinued operations:
Medical Office/Office - The Medical Office Portfolio (see Supplemental Definitions on page 31 for list of properties included in the Medical Office Portfolio)

18



Same-Store Portfolio and Overall Economic Occupancy Levels by Sector
 
 
 
Economic Occupancy - Same-Store Properties(1)
Sector
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Multifamily
 
93.4
%
 
91.9
%
 
92.4
%
 
93.5
%
 
92.7
%
Office
 
90.4
%
 
88.2
%
 
87.3
%
 
87.5
%
 
86.7
%
Retail
 
93.9
%
 
92.9
%
 
91.9
%
 
91.5
%
 
92.7
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
91.8
%
 
90.0
%
 
89.4
%
 
89.6
%
 
89.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Occupancy - All Properties
Sector
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
9/30/2013
 
6/30/2013
Multifamily
 
92.6
%
 
91.6
%
 
92.2
%
 
93.5
%
 
92.7
%
Office
 
86.0
%
 
85.4
%
 
86.0
%
 
86.7
%
 
86.5
%
Medical Office
 
—
%
 
87.4
%
 
89.4
%
 
87.1
%
 
87.2
%
Retail
 
93.9
%
 
92.9
%
 
92.0
%
 
91.5
%
 
92.8
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
88.9
%
 
88.2
%
 
88.6
%
 
88.7
%
 
88.7
%

(1)  Non same-store properties were:
Acquisitions:
    Multifamily - The Paramount and Yale West
    Office - The Army Navy Club Building and 1775 Eye Street
Redevelopment:
     Office - 7900 Westpark Drive
Sold properties classified as continuing operations:
Retail - 5740 Columbia Road (parcel of land at Gateway Overlook)
Sold properties classified as discontinued operations:
Medical Office/Office - The Medical Office Portfolio (see Supplemental Definitions on page 31 for list of properties included in the Medical Office Portfolio)


19


Acquisition and Disposition Summary
 
June 30, 2014
($ in thousands)
0,
Acquisition Summary
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition Date
 
# of Units

Square Feet

 
6/30/2014 Leased Percentage
 
Investment

 
Mortgage Assumed

Yale West
Washington, DC
February 21, 2014
 
216

 
 
89
%
 
$
73,000

 
$
48,221

The Army Navy Club Building
Washington, DC
March 26, 2014
 
 
108,000

 
100
%
 
79,000

 
52,640

1775 Eye Street, NW
Washington, DC
May 1, 2014
 
 
185,000

 
62
%
 
104,500

 
N/A

 
 
 
 
 
293,000

 
 
 
$
256,500

 
$
100,861

2012
Disposition Summary
 
 
 
 
 
 
 
 
 
 
 
 
Disposition Date
 
Property Type
 
Square Feet
 
Contract Sales Price
 
GAAP Gain
Medical Office Portfolio Transactions III & IV
 
January 21, 2014
 
Medical Office
 
427,011

 
$
193,561

 
$
105,985

5740 Columbia Road *
 
May 2, 2014
 
Retail
 
3,000

 
1,600

 
570

 
 
 
 
 
 
430,011

 
$
195,161

 
$
106,555


* 5740 Columbia Road is a parcel of land with a 7-11 store that had been part of our Gateway Overlook retail property in Columbia, Maryland.


20


Development/Re-Development Summary
 
June 30, 2014
(in thousands)

Property and Location
Total Rentable Square Feet
or # of Units
Anticipated Total Cost
Cost to Date
Draws on Construction Loan to Date
Anticipated Construction Completion Date
Leased %
Development Summary
 
 
 
 
 
 
The Maxwell Apartments, Arlington, VA (formerly 650 N. Glebe Road)
163 units & 2,200 square feet retail
$
49,904

$
33,235

$
14,045

fourth quarter 2014
N/A
 
 
 
 
 
 
 
Re-Development Summary
 
 
 
 
 
 
7900 Westpark Drive, McLean, VA
529,000 square feet
$
35,000

$
9,333

N/A

first quarter 2015
57.8%


21



Commercial Leasing Summary - New Leases
 
 
2nd Quarter 2014
 
1st Quarter 2014
 
4th Quarter 2013
 
3rd Quarter 2013
 
2nd Quarter 2013
Gross Leasing Square Footage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
69,367
 
 
43,243
 
 
144,675
 
 
147,194
 
 
94,191
 
      Medical Office Buildings
—
 
 
—
 
 
3,826
 
 
5,804
 
 
3,082
 
      Retail Centers
32,191
 
 
29,527
 
 
22,631
 
 
49,396
 
 
6,240
 
Total
101,558
 

72,770
 

171,132
 
 
202,394
 
 
103,513
 
Weighted Average Term (yrs)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
5.8
 
 
7.3
 
 
7.2
 
 
11.1
 
 
7.8
 
      Medical Office Buildings
0.0
 
 
0.0
 
 
10.3
 
 
5.2
 
 
5.4
 
      Retail Centers
10.2
 
 
9.6
 
 
7.8
 
 
9.8
 
 
7.1
 
Total
7.1
 
 
8.2
 
 
7.3
 
 
10.6
 
 
7.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Rate Increases:
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
      Rate on expiring leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
31.40

 
$
32.00

 
$
28.65

 
$
30.53

 
$
31.31

 
$
32.29

 
$
32.66

 
$
33.28

 
$
28.28

 
$
29.07

            Medical Office Buildings
—

 
—

 
—

 
—

 
29.56

 
31.13

 
39.59

 
41.07

 
31.53

 
34.17

            Retail Centers
22.59

 
23.39

 
25.27

 
25.96

 
26.23

 
26.91

 
19.86

 
20.06

 
31.31

 
31.71

Total
$
28.24

 
$
29.08

 
$
27.28

 
$
28.68

 
$
30.42

 
$
31.35

 
$
29.73

 
$
30.28

 
$
28.56

 
$
29.38

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Rate on new leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
35.71

 
$
33.40

 
$
32.53

 
$
29.86

 
$
33.78

 
$
31.31

 
$
33.06

 
$
28.74

 
$
30.34

 
$
27.53

            Medical Office Buildings
—

 
—

 
—

 
—

 
34.78

 
30.43

 
40.01

 
37.73

 
30.97

 
29.12

            Retail Centers
22.07

 
21.36

 
30.77

 
27.66

 
27.74

 
26.04

 
23.45

 
22.02

 
33.54

 
31.98

Total
$
30.79

 
$
29.04

 
$
31.81

 
$
28.97

 
$
32.78

 
$
30.39

 
$
30.91

 
$
27.36

 
$
30.55

 
$
27.84

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Percentage Increase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
14.7
 %
 
4.4
 %
 
13.6
%
 
(2.2
)%
 
7.9
%
 
(3.0
)%
 
1.2
%
 
(13.7
)%
 
7.3
 %
 
(5.3
)%
            Medical Office Buildings
—
 %
 
—
 %
 
—
%
 
—
 %
 
17.7
%
 
(2.3
)%
 
1.1
%
 
(8.1
)%
 
(1.8
)%
 
(14.8
)%
            Retail Centers
(2.3
)%
 
(8.7
)%
 
21.7
%
 
6.5
 %
 
5.8
%
 
(3.2
)%
 
18.1
%
 
9.8
 %
 
7.1
 %
 
0.8
 %
Total
9.0
 %
 
(0.1
)%
 
16.6
%
 
1.0
 %
 
7.8
%
 
(3.1
)%
 
4.0
%
 
(9.7
)%
 
7.0
 %
 
(5.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
Tenant Improvements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
2,330,006

 
$
33.59

 
$
1,955,769

 
$
45.23

 
$
6,189,544

 
$
42.78

 
$
8,230,229

 
$
55.91

 
$
3,285,080

 
$
34.88

Medical Office Buildings
—

 
—

 
—

 
—

 
63,587

 
16.62

 
101,630

 
17.51

 
67,248

 
21.82

Retail Centers
1,616,068

 
50.20

 
38,923

 
1.32

 
215,340

 
9.52

 
751,184

 
15.21

 
119,800

 
19.20

Subtotal
$
3,946,074

 
$
38.86

 
$
1,994,692

 
$
27.41

 
$
6,468,471

 
$
37.80

 
$
9,083,043

 
$
44.88

 
$
3,472,128

 
$
33.55

Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
1,512,211

 
$
21.80

 
$
1,207,798

 
$
27.93

 
$
4,353,688

 
$
30.09

 
$
6,781,162

 
$
46.07

 
$
2,173,271

 
$
23.08

Medical Office Buildings
—

 
—

 
—

 
—

 
91,665

 
23.96

 
99,930

 
17.22

 
42,827

 
13.90

Retail Centers
300,287

 
9.33

 
388,220

 
13.15

 
180,197

 
7.96

 
517,974

 
10.49

 
71,769

 
11.50

Subtotal
$
1,812,498

 
$
17.84

 
$
1,596,018

 
$
21.93

 
$
4,625,550

 
$
27.03

 
$
7,399,066

 
$
36.56

 
$
2,287,867

 
$
22.10

Tenant Improvements and Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
3,842,217

 
$
55.39

 
$
3,163,567

 
$
73.16

 
$
10,543,232

 
$
72.87

 
$
15,011,391

 
$
101.98

 
$
5,458,351

 
$
57.96

Medical Office Buildings
—

 
—

 
—

 
—

 
155,252

 
40.58

 
201,560

 
34.73

 
110,075

 
35.72

Retail Centers
1,916,355

 
59.53

 
427,143

 
14.47

 
395,537

 
17.48

 
1,269,158

 
25.70

 
191,569

 
30.70

Total
$
5,758,572

 
$
56.70

 
$
3,590,710

 
$
49.34

 
$
11,094,021

 
$
64.83

 
$
16,482,109

 
$
81.44

 
$
5,759,995

 
$
55.65


22



Commercial Leasing Summary - Renewal Leases
 
 
2nd Quarter 2014
 
1st Quarter 2014
 
4th Quarter 2013
 
3rd Quarter 2013
 
2nd Quarter 2013
Gross Leasing Square Footage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
109,686
 
 
60,108
 
 
201,109
 
 
140,894
 
 
92,245
 
      Medical Office Buildings
—
 
 
—
 
 
12,232
 
 
24,471
 
 
49,383
 
      Retail Centers
10,645
 
 
27,100
 
 
38,995
 
 
112,736
 
 
172,474
 
Total
120,331
 
 
87,208
 
 
252,336
 
 
278,101
 
 
314,102
 
Weighted Average Term (yrs)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
4.8
 
 
7.0
 
 
5.8
 
 
6.6
 
 
3.5
 
      Medical Office Buildings
0.0
 
 
0.0
 
 
7.8
 
 
3.0
 
 
10.4
 
      Retail Centers
4.3
 
 
3.3
 
 
4.0
 
 
7.3
 
 
5.3
 
Total
4.8
 
 
5.8
 
 
5.7
 
 
6.5
 
 
5.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Rate Increases:
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
      Rate on expiring leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
33.89

 
$
35.42

 
$
32.71

 
$
35.31

 
$
30.12

 
$
33.00

 
$
38.86

 
$
40.53

 
$
30.72

 
$
32.10

            Medical Office Buildings
—

 
—

 
—

 
—

 
32.36

 
34.47

 
27.49

 
29.14

 
31.60

 
34.20

            Retail Centers
45.12

 
47.17

 
27.54

 
30.66

 
17.51

 
18.22

 
20.07

 
20.74

 
7.78

 
7.89

Total
$
34.89

 
$
36.46

 
$
31.26

 
$
34.05

 
$
28.28

 
$
30.79

 
$
30.25

 
$
31.50

 
$
18.27

 
$
19.14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Rate on new leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
36.12

 
$
34.39

 
$
37.02

 
$
34.06

 
$
35.30

 
$
32.88

 
$
42.04

 
$
39.42

 
$
32.51

 
$
31.62

            Medical Office Buildings
—

 
—

 
—

 
—

 
36.28

 
33.16

 
29.48

 
28.82

 
35.23

 
32.72

            Retail Centers
50.91

 
48.51

 
30.92

 
30.08

 
17.91

 
17.62

 
24.43

 
22.89

 
8.74

 
8.53

Total
$
37.42

 
$
35.64

 
$
35.36

 
$
33.03

 
$
32.66

 
$
30.53

 
$
33.80

 
$
31.79

 
$
19.88

 
$
19.11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Percentage Increase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
6.6
%
 
(2.9
)%
 
13.2
%
 
(3.6
)%
 
17.2
%
 
(0.4
)%
 
8.2
%
 
(2.7
)%
 
5.8
%
 
(1.5
)%
            Medical Office Buildings
—
%
 
—
 %
 
—
%
 
—
 %
 
12.1
%
 
(3.8
)%
 
7.2
%
 
(1.1
)%
 
11.5
%
 
(4.3
)%
            Retail Centers
12.8
%
 
2.8
 %
 
12.3
%
 
(1.9
)%
 
2.3
%
 
(3.3
)%
 
21.7
%
 
10.4
 %
 
12.3
%
 
8.1
 %
Total
7.3
%
 
(2.3
)%
 
13.1
%
 
(3.0
)%
 
15.5
%
 
(0.8
)%
 
11.7
%
 
0.9
 %
 
8.9
%
 
(0.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
Tenant Improvements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
1,897,016

 
$
17.29

 
$
896,712

 
$
14.92

 
$
7,573,493

 
$
37.66

 
$
2,788,460

 
$
19.79

 
$
565,393

 
$
6.12

Medical Office Buildings
—

 
—

 
—

 
—

 
183,219

 
14.98

 
114,252

 
4.67

 
639,396

 
12.94

Retail Centers
—

 
—

 
—

 
—

 
—

 
—

 
28,600

 
0.25

 
65,261

 
0.38

Subtotal
$
1,897,016

 
$
15.76

 
$
896,712

 
$
10.28

 
$
7,756,712

 
$
30.74

 
$
2,931,312

 
$
10.54

 
$
1,270,050

 
$
4.04

Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
1,517,271

 
$
13.83

 
$
1,318,800

 
$
21.94

 
$
4,065,164

 
$
20.21

 
$
2,747,403

 
$
19.50

 
$
220,889

 
$
2.40

Medical Office Buildings
—

 
—

 
—

 
—

 
143,190

 
11.71

 
68,973

 
2.82

 
125,662

 
2.55

Retail Centers
27,278

 
2.56

 
32,300

 
1.19

 
32,725

 
0.84

 
176,809

 
1.57

 
82,993

 
0.48

Subtotal
$
1,544,549

 
$
12.84

 
$
1,351,100

 
$
15.49

 
$
4,241,079

 
$
16.80

 
$
2,993,185

 
$
10.77

 
$
429,544

 
$
1.37

Tenant Improvements and Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
3,414,287

 
$
31.12

 
$
2,215,512

 
$
36.86

 
$
11,638,657

 
$
57.87

 
$
5,535,863

 
$
39.29

 
$
786,282

 
$
8.52

Medical Office Buildings
—

 
—

 
—

 
—

 
326,409

 
26.69

 
183,225

 
7.49

 
765,058

 
15.49

Retail Centers
27,278

 
2.56

 
32,300

 
1.19

 
32,725

 
0.84

 
205,409

 
1.82

 
148,254

 
0.86

Total
$
3,441,565

 
$
28.60

 
$
2,247,812

 
$
25.77

 
$
11,997,791

 
$
47.54

 
$
5,924,497

 
$
21.31

 
$
1,699,594

 
$
5.41


23



10 Largest Tenants - Based on Annualized Rent
 
June 30, 2014
Tenant
Number of Buildings
 
Weighted Average Remaining Lease Term in Months
 
 Percentage of Aggregate Portfolio Annualized Rent
 
Aggregate Rentable Square Feet
 
Percentage of Aggregate Occupied Square Feet
World Bank
1
 
30

 
5.91
%
 
210,354

 
3.36
%
Advisory Board Company
1
 
59

 
3.41
%
 
181,101

 
2.89
%
Booz Allen Hamilton, Inc.
1
 
19

 
2.77
%
 
222,989

 
3.56
%
Engility Corporation
1
 
39

 
2.53
%
 
134,126

 
2.14
%
Squire Patton Boggs (USA) LLP
1
 
34

 
2.47
%
 
110,566

 
1.77
%
Epstein, Becker & Green, P.C.
1
 
30

 
1.34
%
 
53,427

 
0.85
%
General Services Administration
3
 
53

 
1.30
%
 
52,282

 
0.84
%
ManTech International Corporation
2
 
7

 
1.30
%
 
68,846

 
1.10
%
George Washington University
2
 
26

 
1.28
%
 
69,775

 
1.11
%
Alexandria City School Board
1
 
179

 
1.20
%
 
87,883

 
1.40
%
Total/Weighted Average
 
 
44

 
23.51
%
 
1,191,349

 
19.02
%



24



Industry Diversification
 
June 30, 2014
Industry Classification (NAICS)
Annualized Base Rental Revenue
 
Percentage of Aggregate Annualized Rent
 
Aggregate Rentable Square Feet
 
Percentage of Aggregate Square Feet
Professional, Scientific, and Technical Services
$
72,044,888

 
37.96
%
 
2,133,274

 
34.04
%
Credit Intermediation and Related Activities
17,859,457

 
9.41
%
 
334,745

 
5.34
%
Religious, Grantmaking, Civic, Professional, and Similar Organizations
11,520,724

 
6.07
%
 
317,232

 
5.06
%
Food Services and Drinking Places
8,712,267

 
4.59
%
 
283,064

 
4.52
%
Educational Services
8,216,808

 
4.33
%
 
274,371

 
4.38
%
Food and Beverage Stores
6,665,284

 
3.51
%
 
339,197

 
5.41
%
Executive, Legislative, and Other General Government Support
5,120,019

 
2.70
%
 
140,038

 
2.23
%
Ambulatory Health Care Services
4,636,120

 
2.44
%
 
149,094

 
2.38
%
Health and Personal Care Stores
3,812,176

 
2.01
%
 
106,232

 
1.70
%
Personal and Laundry Services
3,651,093

 
1.92
%
 
115,707

 
1.85
%
Broadcasting (except Internet)
3,512,874

 
1.85
%
 
90,810

 
1.45
%
Sporting Goods, Hobby, Book, and Music Stores
3,306,339

 
1.74
%
 
201,827

 
3.22
%
Furniture and Home Furnishings Stores
3,150,172

 
1.66
%
 
160,120

 
2.56
%
Securities, Commodity Contracts, and Other Financial Investments and Related Activities
3,088,353

 
1.63
%
 
87,959

 
1.40
%
Electronics and Appliance Stores
3,064,042

 
1.61
%
 
169,094

 
2.70
%
Miscellaneous Store Retailers
3,051,316

 
1.61
%
 
166,012

 
2.65
%
Clothing and Clothing Accessories Stores
2,803,378

 
1.48
%
 
139,623

 
2.23
%
Administrative and Support Services
2,747,486

 
1.45
%
 
73,725

 
1.18
%
Publishing Industries (except Internet)
2,730,449

 
1.44
%
 
79,659

 
1.27
%
Amusement, Gambling, and Recreation Industries
2,315,096

 
1.22
%
 
123,160

 
1.97
%
General Merchandise Stores
1,875,727

 
0.99
%
 
221,502

 
3.53
%
Nursing and Residential Care Facilities
1,855,198

 
0.98
%
 
68,245

 
1.09
%
Telecommunications
1,571,231

 
0.83
%
 
41,334

 
0.66
%
Real Estate
1,534,654

 
0.81
%
 
47,869

 
0.76
%
Merchant Wholesalers, Durable Goods
1,096,439

 
0.58
%
 
35,100

 
0.56
%
Social Assistance
1,000,105

 
0.53
%
 
44,086

 
0.70
%


25



Industry Diversification (continued)
 
June 30, 2014
Industry Classification (NAICS)
Annualized Base Rental Revenue
 
Percentage of Aggregate Annualized Rent
 
Aggregate Rentable Square Feet
 
Percentage of Aggregate Square Feet
Chemical Manufacturing
918,560

 
0.48
%
 
20,036

 
0.32
%
Building Material and Garden Equipment and Supplies Dealers
906,624

 
0.48
%
 
29,470

 
0.47
%
Construction of Buildings
634,840

 
0.33
%
 
21,127

 
0.34
%
Motor Vehicle and Parts Dealers
601,815

 
0.32
%
 
36,832

 
0.59
%
Insurance Carriers and Related Activities
587,215

 
0.31
%
 
20,263

 
0.32
%
Transportation Equipment Manufacturing
542,685

 
0.29
%
 
19,864

 
0.32
%
Repair and Maintenance
509,438

 
0.27
%
 
22,449

 
0.36
%
Other
4,146,071

 
2.17
%
 
153,037

 
2.44
%
Total
$
189,788,943

 
100.00
%
 
$
6,266,157

 
100.00
%


26



Lease Expirations
 
June 30, 2014
Year
 
Number of Leases
 
Rentable Square Feet
 
Percent of Rentable Square Feet
 
Annualized Rent *
 
Average Rental Rate
 
Percent of Annualized Rent *
Office:
 
 
 
 
 
 
 
 
 
 
 
 
2014
 
40

 
213,428

 
5.08
%
 
$
7,733,610

 
$
36.24

 
4.67
%
2015
 
98

 
600,962

 
14.30
%
 
24,100,459

 
40.10

 
14.55
%
2016
 
103

 
639,105

 
15.21
%
 
21,558,160

 
33.73

 
13.01
%
2017
 
78

 
510,797

 
12.15
%
 
20,125,789

 
39.40

 
12.15
%
2018
 
73

 
360,343

 
8.58
%
 
13,912,017

 
38.61

 
8.40
%
2019 and thereafter
 
230

 
1,877,743

 
44.68
%
 
78,211,192

 
41.65

 
47.22
%
 
 
622

 
4,202,378

 
100.00
%
 
$
165,641,227

 
39.42

 
100.00
%
Retail:
 
 
 
 
 
 
 
 
 
 
 
 
2014
 
30

 
75,606

 
3.44
%
 
$
1,669,496

 
22.08

 
3.34
%
2015
 
50

 
357,170

 
16.27
%
 
7,151,159

 
20.02

 
14.31
%
2016
 
29

 
203,332

 
9.26
%
 
4,312,390

 
21.21

 
8.63
%
2017
 
46

 
255,697

 
11.65
%
 
6,807,624

 
26.62

 
13.63
%
2018
 
40

 
363,373

 
16.55
%
 
5,379,128

 
14.80

 
10.77
%
2019 and thereafter
 
115

 
940,230

 
42.83
%
 
24,643,839

 
26.21

 
49.32
%
 
 
310

 
2,195,408

 
100.00
%
 
$
49,963,636

 
22.76

 
100.00
%
Total:
 
 
 
 
 
 
 
 
 
 
 
 
2014
 
70

 
289,034

 
4.52
%
 
9,403,106

 
32.53

 
4.36
%
2015
 
148

 
958,132

 
14.98
%
 
31,251,618

 
32.62

 
14.49
%
2016
 
132

 
842,437

 
13.17
%
 
25,870,550

 
30.71

 
12.00
%
2017
 
124

 
766,494

 
11.98
%
 
26,933,413

 
35.14

 
12.49
%
2018
 
113

 
723,716

 
11.31
%
 
19,291,145

 
26.66

 
8.95
%
2019 and thereafter
 
345

 
2,817,973

 
44.04
%
 
102,855,031

 
36.50

 
47.71
%
 
 
932

 
6,397,786

 
100.00
%
 
$
215,604,863

 
33.70

 
100.00
%
 
 
 
* Annualized Rent is equal to the rental rate effective at lease expiration (cash basis) multiplied by 12.
 
 

27



Schedule of Properties
 
June 30, 2014
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET
Office Buildings
 
 
 
 
 
 
 
 
1901 Pennsylvania Avenue
 
Washington, DC
 
1977
 
1960
 
101,000

51 Monroe Street
 
Rockville, MD
 
1979
 
1975
 
221,000

515 King Street
 
Alexandria, VA
 
1992
 
1966
 
75,000

6110 Executive Boulevard
 
Rockville, MD
 
1995
 
1971
 
201,000

1220 19th Street
 
Washington, DC
 
1995
 
1976
 
103,000

1600 Wilson Boulevard
 
Arlington, VA
 
1997
 
1973
 
166,000

7900 Westpark Drive
 
McLean, VA
 
1997
 
1972/1986/1999
 
529,000

600 Jefferson Plaza
 
Rockville, MD
 
1999
 
1985
 
113,000

Wayne Plaza
 
Silver Spring, MD
 
2000
 
1970
 
97,000

Courthouse Square
 
Alexandria, VA
 
2000
 
1979
 
115,000

One Central Plaza
 
Rockville, MD
 
2001
 
1974
 
267,000

1776 G Street
 
Washington, DC
 
2003
 
1979
 
263,000

West Gude Drive
 
Rockville, MD
 
2006
 
1984/1986/1988
 
276,000

Monument II
 
Herndon, VA
 
2007
 
2000
 
208,000

2000 M Street
 
Washington, DC
 
2007
 
1971
 
230,000

2445 M Street
 
Washington, DC
 
2008
 
1986
 
290,000

925 Corporate Drive
 
Stafford, VA
 
2010
 
2007
 
133,000

1000 Corporate Drive
 
Stafford, VA
 
2010
 
2009
 
136,000

1140 Connecticut Avenue
 
Washington, DC
 
2011
 
1966
 
183,000

1227 25th Street
 
Washington, DC
 
2011
 
1988
 
135,000

Braddock Metro Center
 
Alexandria, VA
 
2011
 
1985
 
347,000

John Marshall II
 
Tysons Corner, VA
 
2011
 
1996/2010
 
223,000

Fairgate at Ballston
 
Arlington, VA
 
2012
 
1988
 
142,000

The Army Navy Club Building
 
Washington, DC
 
2014
 
1912/1987
 
108,000

1775 Eye Street, NW
 
Washington, DC
 
2014
 
1964
 
185,000

Subtotal
 
 
 
 
 
 
 
4,847,000


28



Schedule of Properties (continued)
 
March 31, 2014
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET
Retail Centers
 
 
 
 
 
 
 
 
Takoma Park
 
Takoma Park, MD
 
1963
 
1962
 
51,000

Westminster
 
Westminster, MD
 
1972
 
1969
 
150,000

Concord Centre
 
Springfield, VA
 
1973
 
1960
 
76,000

Wheaton Park
 
Wheaton, MD
 
1977
 
1967
 
74,000

Bradlee Shopping Center
 
Alexandria, VA
 
1984
 
1955
 
171,000

Chevy Chase Metro Plaza
 
Washington, DC
 
1985
 
1975
 
49,000

Montgomery Village Center
 
Gaithersburg, MD
 
1992
 
1969
 
197,000

Shoppes of Foxchase
 
Alexandria, VA
 
1994
 
1960/2006
 
134,000

Frederick County Square
 
Frederick, MD
 
1995
 
1973
 
227,000

800 S. Washington Street
 
Alexandria, VA
 
1998/2003
 
1955/1959
 
47,000

Centre at Hagerstown
 
Hagerstown, MD
 
2002
 
2000
 
332,000

Frederick Crossing
 
Frederick, MD
 
2005
 
1999/2003
 
295,000

Randolph Shopping Center
 
Rockville, MD
 
2006
 
1972
 
82,000

Montrose Shopping Center
 
Rockville, MD
 
2006
 
1970
 
145,000

Gateway Overlook
 
Columbia, MD
 
2010
 
2007
 
220,000

Olney Village Center
 
Olney, MD
 
2011
 
1979/2003
 
199,000

Subtotal
 
 
 
 
 
 
 
2,449,000



29



Schedule of Properties (continued)
 
June 30, 2014
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET (1)
Multifamily Buildings / # units
 
 
 
 
 
 
 
 
3801 Connecticut Avenue / 307
 
Washington, DC
 
1963
 
1951
 
179,000

Roosevelt Towers / 191
 
Falls Church, VA
 
1965
 
1964
 
170,000

Country Club Towers / 227
 
Arlington, VA
 
1969
 
1965
 
159,000

Park Adams / 200
 
Arlington, VA
 
1969
 
1959
 
173,000

Munson Hill Towers / 279
 
Falls Church, VA
 
1970
 
1963
 
258,000

The Ashby at McLean / 256
 
McLean, VA
 
1996
 
1982
 
274,000

Walker House Apartments / 212
 
Gaithersburg, MD
 
1996
 
1971/2003
 
157,000

Bethesda Hill Apartments / 195
 
Bethesda, MD
 
1997
 
1986
 
225,000

Bennett Park / 224
 
Arlington, VA
 
2007
 
2007
 
214,000

Clayborne / 74
 
Alexandria, VA
 
2008
 
2008
 
60,000

Kenmore Apartments / 374
 
Washington, DC
 
2008
 
1948
 
268,000

The Paramount / 135
 
Arlington, VA
 
2013
 
1984
 
141,000

Yale West / 216
 
Washington, DC
 
2014
 
2011
 
173,000

Subtotal (2,890 units)
 
 
 
 
 
 
 
2,451,000

TOTAL
 
 
 
 
 
 
 
9,747,000

(1) Multifamily buildings are presented in gross square feet.

30



Supplemental Definitions
 
June 30, 2014
Adjusted EBITDA (a non-GAAP measure) is earnings attributable to the controlling interest before interest expense, taxes, depreciation, amortization, real estate impairment, gain on sale of real estate, gain/loss on extinguishment of debt and gain/loss from non-disposal activities.
Annualized base rent ("ABR") is calculated as monthly base rent (cash basis) per the lease, as of the reporting period, multiplied by 12.
Debt service coverage ratio is computed by dividing earnings attributable to the controlling interest before interest expense, taxes, depreciation, amortization, real estate impairment, gain on sale of real estate, gain/loss on extinguishment of debt and gain/loss from non-disposal activities by interest expense (including interest expense from discontinued operations) and principal amortization.
Debt to total market capitalization is total debt divided by the sum of total debt plus the market value of shares outstanding at the end of the period.
Earnings to fixed charges ratio is computed by dividing earnings attributable to the controlling interest by fixed charges. For this purpose, earnings consist of income from continuing operations (or net income if there are no discontinued operations) plus fixed charges, less capitalized interest. Fixed charges consist of interest expense (excluding interest expense from discontinued operations), including amortized costs of debt issuance, plus interest costs capitalized.
Economic occupancy is calculated as actual real estate rental revenue recognized for the period indicated as a percentage of gross potential real estate rental revenue for that period. We determine gross potential real estate rental revenue by valuing occupied units or square footage at contract rates and vacant units or square footage at market rates for comparable properties. We do not consider percentage rents and expense reimbursements in computing economic occupancy percentages.
Funds from operations ("FFO") is defined by The National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) in an April, 2002 White Paper as net income (computed in accordance with generally accepted accounting principles (“GAAP”)) excluding gains (or losses) associated with sales of property and impairment of depreciable real estate, 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. FFO is a non-GAAP measure.
Core Funds From Operations ("Core FFO") is calculated by adjusting FFO for the following items (which we believe are not indicative of the performance of Washington REIT’s operating portfolio and affect the comparative measurement of Washington REIT’s operating performance over time): (1) gains or losses on extinguishment of debt, (2) costs related to the acquisition of properties, (3) severance expense related to corporate reorganization and related to the CEO's retirement and (4) property impairments not already excluded from FFO, as appropriate. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measure of Washington REIT’s ability to incur and service debt, and distribute dividends to its shareholders. Core FFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
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) non-cash fair value interest expense and (5) amortization of restricted share compensation, then adding or subtracting the (6) amortization of lease intangibles , (7) real estate impairment and (8) non-cash gain/loss on extinguishment of debt, 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.
Core Funds Available for Distribution ("Core FAD") is calculated by adjusting FAD for the following items (which we believe are not indicative of the performance of Washington REIT’s operating portfolio and affect the comparative measurement of Washington REIT’s operating performance over time): (1) gains or losses on extinguishment of debt, (2) costs related to the acquisition of properties, (3) non-share-based severance expense related to corporate reorganization and related to the CEO's retirement and (4) property impairments not already excluded from FAD, as appropriate. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FAD serves as a useful, supplementary measure of Washington REIT’s ability to incur and service debt, and distribute dividends to its shareholders. Core FAD is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
The Medical Office Portfolio consists of every medical property, as well as undeveloped land, 4661 Kenmore Ave, and two office properties, Woodholme Center and 6565 Arlington Boulevard. We entered into four separate purchase and sale agreements. Transaction I of the Medical Office Portfolio sale and purchase agreement consists of medical office properties (2440 M Street, 15001 Shady Grove Road, 15505 Shady Grove Road, 19500 at Riverside Park formerly Lansdowne Medical Office Building, 9707 Medical Center Drive, CentreMed I and II, 8301 Arlington Boulevard, Sterling Medical Office Building, Shady Grove Medical Village II, Alexandria Professional Center, Ashburn Farm Office Park I, Ashburn Farm Office Park II, Ashburn Farm Office Park III and Woodholme Medical Office Building) and two office properties (6565 Arlington Boulevard and Woodholme Center). Transaction II of the Medical Office Portfolio purchase and sale agreement consist of undeveloped land (4661 Kenmore Ave). Transaction III of the Medical Office Portfolio purchase and sale agreement consists of medical office properties (Woodburn Medical Park I and Woodburn Medical Park II). Transaction IV of the Medical Office Portfolio purchase and sale agreement consists of a medical office properties (Prosperity Medical Center I and II, and Prosperity Medical Center III).
Physical occupancy is calculated as occupied square footage as a percentage of total square footage as of the last day of that period.

31


Recurring capital expenditures represent non-accretive building improvements and leasing costs required to maintain current revenues. Recurring capital expenditures do not include acquisition capital that was taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to "operating standard."
Rent increases on renewals and rollovers are calculated as the difference, weighted by square feet, of the net ABR due the first month after a term commencement date and the net ABR due the last month prior to the termination date of the former tenant's term.
Same-store portfolio properties include all stabilized properties that were owned for the entirety of the current and prior reporting periods, and exclude properties under redevelopment or development and properties purchased or sold at any time during the periods being compared. 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. Redevelopment and development properties are included in the same-store pool upon completion of the redevelopment or development, and the earlier of achieving 90% occupancy or two years after completion.
Same-store portfolio net operating income (NOI) growth is the change in the NOI of the same-store portfolio properties from the prior reporting period to the current reporting period.

32