Washington Real Estate Investment Trust
 
 
Fourth Quarter 2014
 
 
 
 
Supplemental Operating and Financial Data
 
 
Contact:
 
1775 Eye Street, NW
 
 
William T. Camp
 
 Suite 1000
 
 
Executive Vice President and
 
Washington, DC 20006
 
 
Chief Financial Officer
 
(202) 774-3200
 
 
E-mail: bcamp@washreit.com
 
(301) 984-9610 fax
 
 
 
 
 
 
 
 





Company Background and Highlights
Fourth Quarter 2014
Washington REIT (Washington Real Estate Investment Trust - NYSE: WRE) is a self-administered, self-managed, equity real estate investment trust investing in income-producing properties in the greater Washington, DC region. Washington REIT is diversified, as it invests in office, retail, and multifamily properties and land for development.

2014 Highlights

During 2014, the remainder of the capital from the Medical Office Portfolio was reinvested. Approximately $300 million of assets were acquired, all located in Washington, DC. Washington REIT continued to improve the quality of its portfolio by acquiring a well-located assets in urban in-fill locations.

For the year, Washington REIT posted same-store GAAP rental rate growth of 0.8% and achieved 5.3% same-store GAAP net operating income growth. In 2014, over 1.4 million square feet of commercial lease transactions were executed including renewals of our large tenants, World Bank and Booz Allen Hamilton, Inc.

Washington REIT, through a joint venture with Crimson Partners, has completed the major construction work of The Maxwell development, a six-story, 163-unit mid-rise apartment community with 2,200 square feet of retail in Arlington, VA with the first tenant having taken occupancy in January. The Maxwell is located at the corner of North Glebe Road and North Carlin Springs Road, across from Ballston Common Mall and within walking distance of the Ballston Metro Station. The total cost of the project is estimated to be $50 million.

Washington REIT commenced a $35.0 million renovation of Silverline Center (formerly 7900 Westpark), a 530,000 square foot office complex located in Tysons, Virginia. The renovation will reposition the property to take advantage of its close proximity to the newly constructed I-495 Express Lanes and the completed Tysons Corner Metro Station (Silver Line). The renovation is anticipated to be completed in the first quarter of 2015.

Fourth Quarter 2014 Update and Recent Activity

During the fourth quarter, Washington REIT acquired Spring Valley Retail Center, a 75,000 square foot retail shopping center located in Northwest Washington, DC for $40.5 million in an off-market transaction. Spring Valley Retail Center consists of five separate buildings of multi-level retail space in the 4800 block of Massachusetts Avenue located in the affluent Spring Valley neighborhood.

In the fourth quarter, the Company also announced plans to relocate its corporate headquarters from Rockville, MD to Washington, DC. This was completed on January 20, 2015. The new headquarters is located in the Central Business District of Washington, DC at 1775 Eye Street, NW, which Washington REIT acquired in 2014. 1775 Eye Street is directly across the street from Farragut West (Blue and Orange Lines) and two blocks from Farragut North (Red Line) Metro stations.

During the fourth quarter and through January 6, 2015, Washington REIT issued 1,308,853 shares at a weighted average price of $27.93 per share through its Sales Agency Financing Agreement with BNY Mellon Capital Markets, LLC, generating approximately $36.5 million in proceeds. These proceeds were used for general corporate purposes.

Washington REIT signed commercial leases totaling approximately 724,000 square feet, including 103,000 square feet of new leases and 621,000 square feet of renewal leases. New leases had an average rental rate increase of 25.6% over expiring lease rates on a GAAP basis and an average lease term of 8.6




years. Commercial tenant improvements costs were $45.78 per square foot and leasing commissions and incentives were $34.88 per square foot for new leases. Renewal leases had an average rental rate increase of 5.0% over expiring lease rates on a GAAP basis and an average lease term of 6.1 years. Commercial tenant improvements costs were $24.15 per square foot and leasing commissions and incentives were $14.96 per square foot for renewal leases.

On January 20, 2015, Washington REIT announced the appointment of Mr. Stephen E. Riffee as Chief Financial Officer-elect. Mr. Riffee will succeed Bill Camp who, as previously disclosed, is stepping down as CFO after the year-end reporting period. Prior to joining Washington REIT, Mr. Riffee served as Executive Vice President and Chief Financial Officer for Corporate Office Properties Trust (COPT), a public office REIT. In this role, he oversaw all financial functions, the legal department and information technology. Before joining COPT in 2006, he was Executive Vice President and Chief Financial Officer for CarrAmerica Realty Corporation, a national public office REIT. At CarrAmerica, he developed one of the industry’s leading financial and IT teams.

On January 27, 2015, Washington REIT announced the election of Mr. Thomas H. Nolan, Jr., an additional independent member, to the Board of Trustees. Mr. Nolan currently serves as the Chairman of the Board and Chief Executive Officer of Spirit Realty Capital, Inc., a publicly traded REIT that invests primarily in single-tenant, operationally essential real estate.

As of December 31, 2014, Washington REIT owned a diversified portfolio of 56 properties totaling approximately 7 million square feet of commercial space and 3,053 multifamily units, and land held for development. These 56 properties consist of 25 office properties, 17 retail centers and 14 multifamily properties. Washington REIT shares are publicly traded on the New York Stock Exchange (NYSE: WRE).





Company Background and Highlights
Fourth Quarter 2014

Net Operating Income Contribution by Sector - Fourth 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 Securities and Exchange Commission, including our 2013 Form 10-K filed on March 3, 2014 and our 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
December 31, 2014
Schedule
Page
Key Financial Data
 
 
Consolidated Statements of Operations
 
Medical Office Portfolio
 
Consolidated Balance Sheets
 
Funds From Operations
 
Funds Available for Distribution
 
Adjusted Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)
Capital Analysis
 
 
Long-Term Debt Analysis
 
Long-Term Debt Maturities
 
Debt Covenant Compliance
 
Capital Analysis
Portfolio Analysis
 
 
Same-Store Portfolio Net Operating Income (NOI) Growth & Rental Rate Growth
 
Same-Store Portfolio Net Operating Income (NOI) Detail for the Quarter
 
Same-Store Portfolio Net Operating Income (NOI) Detail for the Year
 
Net Operating Income (NOI) by Region
 
Same-Store Portfolio & Overall Physical Occupancy Levels by Sector
 
Same-Store Portfolio & Overall Economic Occupancy Levels by Sector
Growth and Strategy
 
 
Acquisition and Disposition Summary
 
Development/Redevelopment Summary
Tenant Analysis
 
 
Commercial Leasing Summary- New Leases
 
Commercial Leasing Summary- Renewal Leases
 
10 Largest Tenants - Based on Annualized Rent
 
Industry Diversification
 
Lease Expirations
Appendix
 
 
Schedule of Properties
 
Supplemental Definitions





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

 
 
Twelve Months Ended
 
Three Months Ended
OPERATING RESULTS
12/31/2014
 
12/31/2013
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
Real estate rental revenue
$
288,637

 
$
263,024

 
$
74,359

 
$
73,413

 
$
72,254

 
$
68,611

 
$
66,721

Real estate expenses
(103,695
)
 
(93,293
)
 
(25,911
)
 
(25,914
)
 
(25,528
)
 
(26,342
)
 
(23,826
)
 
184,942

 
169,731

 
48,448

 
47,499

 
46,726

 
42,269

 
42,895

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate depreciation and amortization
(96,011
)
 
(85,740
)
 
(24,503
)
 
(24,354
)
 
(24,401
)
 
(22,753
)
 
(22,412
)
Income from real estate
88,931

 
83,991

 
23,945

 
23,145

 
22,325

 
19,516

 
20,483

 
 
 
 
 
 
 
 
 
 
 
 
 
 
General and administrative expenses
(19,761
)
 
(17,535
)
 
(5,981
)
 
(4,523
)
 
(4,828
)
 
(4,429
)
 
(5,818
)
Acquisition costs
(5,710
)
 
(1,265
)
 
(663
)
 
(69
)
 
(1,933
)
 
(3,045
)
 
(817
)
Interest expense
(59,785
)
 
(63,573
)
 
(15,183
)
 
(15,087
)
 
(14,985
)
 
(14,530
)
 
(15,629
)
Other income
825

 
926

 
191

 
192

 
219

 
223

 
221

Gain on sale of real estate
570

 

 

 

 
570

 

 

Loss on extinguishment of debt

 
(2,737
)
 

 

 

 

 
(2,737
)
Income (loss) from continuing operations
5,070

 
(193
)
 
2,309

 
3,658

 
1,368

 
(2,265
)
 
(4,297
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Income from operations of properties sold or held for sale
546

 
15,395

 

 

 

 
546

 
4,256

  Gain (loss) on sale of real estate
105,985

 
22,144

 

 

 
(288
)
 
106,273

 
18,949

Income (loss) from discontinued operations
106,531

 
37,539

 

 

 
(288
)
 
106,819

 
23,205

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
111,601

 
37,346

 
2,309

 
3,658

 
1,080

 
104,554

 
18,908

Less: Net loss from noncontrolling interests
38

 

 
21

 
10

 
7

 

 

Net income attributable to the controlling interests
$
111,639

 
$
37,346

 
$
2,330

 
$
3,668

 
$
1,087

 
$
104,554

 
$
18,908

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Share Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to the controlling interests
$
1.67

 
$
0.55

 
$
0.03

 
$
0.05

 
$
0.02

 
$
1.56

 
$
0.28

Fully diluted weighted average shares outstanding
66,837

 
66,580

 
67,065

 
66,790

 
66,761

 
66,701

 
66,591

Percentage of Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate expenses
35.9
%
 
35.5
 %
 
34.8
%
 
35.3
%
 
35.3
%
 
38.4
 %
 
35.7
 %
General and administrative expenses
6.8
%
 
6.7
 %
 
8.0
%
 
6.2
%
 
6.7
%
 
6.5
 %
 
8.7
 %
Ratios:
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA / Interest expense
2.7
x
 
2.8
x
 
2.8
x
 
2.9
x
 
2.7
x
 
2.5
x
 
2.6
x
Income (loss) from continuing operations/Total real estate revenue
1.8
%
 
(0.1
)%
 
3.1
%
 
5.0
%
 
1.9
%
 
(3.3
)%
 
(6.4
)%
Net income attributable to the controlling interest/Total real estate revenue
38.7
%
 
14.2
 %
 
3.1
%
 
5.0
%
 
1.5
%
 
152.4
 %
 
28.3
 %
Note: Certain prior period amounts have been reclassified to conform to the current period presentation.
 
 

4



Medical Office Portfolio
(In thousands)
(Unaudited)

 
 
Twelve Months Ended
 
Three Months Ended
Income from Medical Office Portfolio (1):
12/31/2014

 
12/31/2013

 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
Real estate rental revenue
$
892

 
$
45,445

 
$

 
$

 
$

 
$
892

 
$
8,651

Real estate expenses
(346
)
 
(16,878
)
 

 

 

 
(346
)
 
(4,184
)
 
546

 
28,567

 

 

 

 
546

 
4,467

Real estate depreciation and amortization

 
(12,161
)
 

 

 

 

 

Interest expense

 
(1,196
)
 

 

 

 

 
(211
)
Income from operations of Medical Office Portfolio (1)
546

 
15,210

 

 

 

 
546

 
4,256

Income from operations of non medical office portfolio sold properties (2)

 
185

 

 

 

 

 

Gain on sale of real estate
105,985

 
22,144

 

 

 
(288
)
 
106,273

 
18,949

Income (loss) from discontinued operations
$
106,531

 
$
37,539

 
$

 
$

 
$
(288
)
 
$
106,819

 
$
23,205

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

 
$

 
$

 
$

 
$
125,967

Less accumulated depreciation
 
 
 
 

 

 

 

 
(46,066
)
Investment in Medical Office Portfolio (1)
 
 
 
 
$

 
$

 
$

 
$

 
$
79,901

(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.
 
(2) Non medical office portfolio sold or help for sale properties:
The Atrium Building (sold on March 19, 2013)
 

5




Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
Assets
 
 
 
 
 
 
 
 
 
Land
$
543,546

 
$
519,859

 
$
519,859

 
$
472,056

 
$
426,575

Income producing property
1,927,407

 
1,867,752

 
1,853,982

 
1,784,850

 
1,675,652

 
2,470,953

 
2,387,611

 
2,373,841

 
2,256,906

 
2,102,227

Accumulated depreciation and amortization
(640,434
)
 
(620,279
)
 
(600,171
)
 
(581,644
)
 
(565,342
)
Net income producing property
1,830,519

 
1,767,332

 
1,773,670

 
1,675,262

 
1,536,885

Development in progress, including land held for development
76,235

 
99,500

 
83,970

 
68,963

 
61,315

Total real estate held for investment, net
1,906,754

 
1,866,832

 
1,857,640

 
1,744,225

 
1,598,200

Investment in real estate held for sale, net

 

 

 

 
79,901

Cash and cash equivalents
15,827

 
8,571

 
23,009

 
62,080

 
130,343

Restricted cash
10,299

 
9,496

 
11,369

 
107,039

 
9,189

Rents and other receivables, net of allowance for doubtful accounts
59,745

 
58,135

 
55,583

 
52,736

 
48,756

Prepaid expenses and other assets
121,082

 
116,345

 
112,548

 
109,092

 
105,004

Other assets related to properties sold or held for sale

 

 

 

 
4,100

Total assets
$
2,113,707

 
$
2,059,379

 
$
2,060,149

 
$
2,075,172

 
$
1,975,493

Liabilities
 
 
 
 
 
 
 
 
 
Notes payable
$
747,208

 
$
747,082

 
$
746,956

 
$
746,830

 
$
846,703

Mortgage notes payable
418,525

 
413,330

 
406,975

 
404,359

 
294,671

Lines of credit/short-term note payable
50,000

 
5,000

 

 

 

Accounts payable and other liabilities
54,318

 
64,153

 
59,719

 
56,804

 
51,742

Advance rents
12,528

 
12,211

 
13,172

 
14,688

 
13,529

Tenant security deposits
8,899

 
8,625

 
8,686

 
8,402

 
7,869

Other liabilities related to properties sold or held for sale

 

 

 

 
1,533

Total liabilities
1,291,478

 
1,250,401

 
1,235,508

 
1,231,083

 
1,216,047

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

 

 

 

 

Shares of beneficial interest, $0.01 par value; 100,000 shares authorized
678

 
667

 
666

 
666

 
665

Additional paid-in capital
1,184,395

 
1,153,344

 
1,152,647

 
1,151,353

 
1,151,174

Distributions in excess of net income
(365,518
)
 
(347,724
)
 
(331,373
)
 
(312,417
)
 
(396,880
)
Total shareholders' equity
819,555

 
806,287

 
821,940

 
839,602

 
754,959

Noncontrolling interests in subsidiaries
2,674

 
2,691

 
2,701

 
4,487

 
4,487

Total equity
822,229

 
808,978

 
824,641

 
844,089

 
759,446

Total liabilities and equity
$
2,113,707

 
$
2,059,379

 
$
2,060,149

 
$
2,075,172

 
$
1,975,493

Total Debt / Total Market Capitalization
0.39
:1
 
0.41
:1
 
0.40
:1
 
0.42
:1
 
0.42
:1

6




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

 
 
Twelve Months Ended
 
Three Months Ended
 
12/31/2014
 
12/31/2013
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
Funds from operations (FFO)(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
$
111,601

 
$
37,346

 
$
2,309

 
$
3,658

 
$
1,080

 
$
104,554

 
$
18,908

Real estate depreciation and amortization
96,011

 
85,740

 
24,503

 
24,354

 
24,401

 
22,753

 
22,412

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

 

 

 
(570
)
 

 

Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sale of real estate
(105,985
)
 
(22,144
)
 

 

 
288

 
(106,273
)
 
(18,949
)
Real estate depreciation and amortization

 
12,161

 

 

 

 

 

FFO
$
101,057

 
$
113,103

 
$
26,812

 
$
28,012

 
$
25,199

 
$
21,034

 
$
22,371

Loss on extinguishment of debt

 
2,737

 

 

 

 

 
2,737

Real estate impairment

 
92

 

 

 

 

 
92

Severance expense
1,600

 
2,490

 
582

 
394

 
576

 
48

 
2,157

Relocation expense
764

 

 
764

 

 

 

 

Acquisition costs
5,710

 
1,265

 
663

 
69

 
1,933

 
3,045

 
817

Core FFO (1)
$
109,131

 
$
119,687

 
$
28,821

 
$
28,475

 
$
27,708

 
$
24,127

 
$
28,174

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allocation to participating securities(2)
$
(317
)
 
$
(415
)
 
$
(53
)
 
$
(44
)
 
$
(17
)
 
$
(295
)
 
$
(44
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FFO per share - basic
$
1.51

 
$
1.69

 
$
0.40

 
$
0.42

 
$
0.38

 
$
0.31

 
$
0.34

FFO per share - fully diluted
$
1.51

 
$
1.69

 
$
0.40

 
$
0.42

 
$
0.38

 
$
0.31

 
$
0.34

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core FFO per share - fully diluted
$
1.63

 
$
1.79

 
$
0.43

 
$
0.43

 
$
0.41

 
$
0.36

 
$
0.42

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common dividend per share
$
1.2000

 
$
1.2000

 
$
0.3000

 
$
0.3000

 
$
0.3000

 
$
0.3000

 
$
0.3000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average shares - basic
66,795

 
66,580

 
67,002

 
66,738

 
66,732

 
66,701

 
66,591

Average shares - fully diluted
66,837

 
66,609

 
67,065

 
66,790

 
66,761

 
66,750

 
66,634

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  See "Supplemental Definitions" on page 32 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)

 

 
Twelve Months Ended
 
Three Months Ended
 
12/31/2014
 
12/31/2013
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
Funds available for distribution (FAD)(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
FFO
$
101,057

 
$
113,103

 
$
26,812

 
$
28,012

 
$
25,199

 
$
21,034

 
$
22,371

Non-cash loss on extinguishment of debt

 
88

 

 

 

 

 
88

Tenant improvements and leasing incentives
(29,664
)
 
(23,429
)
 
(7,103
)
 
(7,649
)
 
(9,612
)
 
(5,300
)
 
(8,256
)
Leasing commissions
(12,083
)
 
(12,915
)
 
(7,800
)
 
(1,323
)
 
(1,721
)
 
(1,239
)
 
(5,544
)
Recurring capital improvements
(6,029
)
 
(6,902
)
 
(1,811
)
 
(1,720
)
 
(1,610
)
 
(888
)
 
(1,953
)
Straight-line rent, net
(2,821
)
 
(1,757
)
 
(1,087
)
 
(658
)
 
(723
)
 
(353
)
 
(353
)
Non-cash fair value interest expense
290

 
1,020

 
33

 
32

 
30

 
195

 
256

Non-real estate depreciation and amortization
4,348

 
3,736

 
1,578

 
994

 
904

 
872

 
906

Amortization of lease intangibles, net
2,349

 
475

 
729

 
704

 
677

 
239

 
219

Amortization and expensing of restricted share and unit compensation
4,911

 
6,211

 
1,134

 
1,307

 
1,429

 
1,041

 
2,623

Real estate impairment

 
92

 

 

 

 

 
92

FAD
$
62,358

 
$
79,722

 
$
12,485

 
$
19,699

 
$
14,573

 
$
15,601

 
$
10,449

Cash loss on extinguishment of debt

 
2,649

 

 

 

 

 
2,649

Non-share-based severance expense
1,424

 
1,537

 
546

 
313

 
517

 
48

 
1,537

Relocation expense
85

 

 
85

 

 

 

 

Acquisition costs
5,710

 
1,265

 
663

 
69

 
1,933

 
3,045

 
817

Core FAD (1)
$
69,577

 
$
85,173

 
$
13,779

 
$
20,081

 
$
17,023

 
$
18,694

 
$
15,452

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allocation to participating securities(2)
$
(317
)
 
$
(415
)
 
$
(53
)
 
$
(44
)
 
$
(17
)
 
$
(295
)
 
$
(44
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FAD per share - basic
$
0.93

 
$
1.19

 
$
0.19

 
$
0.29

 
$
0.22

 
$
0.23

 
$
0.16

FAD per share - fully diluted
$
0.93

 
$
1.19

 
$
0.19

 
$
0.29

 
$
0.22

 
$
0.23

 
$
0.16

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core FAD per share - fully diluted
$
1.04

 
$
1.27

 
$
0.20

 
$
0.30

 
$
0.25

 
$
0.28

 
$
0.23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common dividend per share
$
1.20

 
$
1.20

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average shares - basic
66,795

 
66,580

 
67,002

 
66,738

 
66,732

 
66,701

 
66,591

Average shares - fully diluted
66,837

 
66,609

 
67,065

 
66,790

 
66,761

 
66,750

 
66,634

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  See "Supplemental Definitions" on page 32 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)
 

 
Twelve Months Ended
 
Three Months Ended
 
12/31/2014
 
12/31/2013
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
Adjusted EBITDA(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to the controlling interests
$
111,639

 
$
37,346

 
$
2,330

 
$
3,668

 
$
1,087

 
$
104,554

 
$
18,908

Add:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, including discontinued operations
59,785

 
64,769

 
15,183

 
15,087

 
14,985

 
14,530

 
15,840

Real estate depreciation and amortization, including discontinued operations
96,011

 
97,901

 
24,503

 
24,354

 
24,401

 
22,753

 
22,412

Income tax expense
117

 
5

 

 
46

 
71

 

 
(25
)
Real estate impairment

 
92

 

 

 

 

 
92

Non-real estate depreciation
1,279

 
810

 
793

 
113

 
180

 
193

 
196

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
    Gain on sale of real estate
(106,555
)
 
(22,144
)
 

 

 
(282
)
 
(106,273
)
 
(18,949
)
    Loss on extinguishment of debt

 
2,737

 

 

 

 

 
2,737

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
162,276

 
$
181,516

 
$
42,809

 
$
43,268

 
$
40,442

 
$
35,757

 
$
41,211

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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
(In thousands)
 

 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
Balances Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Conventional fixed rate
$
418,525

 
$
413,330

 
$
406,975

 
$
404,359

 
$
294,671

Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds and notes
747,208

 
747,082

 
746,956

 
746,830

 
846,703

Credit facility
50,000

 
5,000

 

 

 

Unsecured total
797,208

 
752,082

 
746,956

 
746,830

 
846,703

Total
$
1,215,733

 
$
1,165,412

 
$
1,153,931

 
$
1,151,189

 
$
1,141,374

 
 
 
 
 
 
 
 
 
 
Average Interest Rates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Conventional fixed rate
5.2
%
 
5.3
%
 
5.3
%
 
5.4
%
 
6.1
%
Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds
4.9
%
 
4.9
%
 
4.9
%
 
4.9
%
 
4.9
%
Credit facilities
1.4
%
 
1.4
%
 
%
 
%
 
%
Unsecured total
4.7
%
 
4.8
%
 
4.9
%
 
4.9
%
 
4.9
%
Average
4.9
%
 
5.0
%
 
5.0
%
 
5.0
%
 
5.2
%

Note: The current balances outstanding of the secured and unsecured fixed rate bonds and notes are shown net of discounts/premiums of $4.0 million and $2.8 million, respectively.
 




    

10




Long Term Debt Maturities

 
 
 
 
Future Maturities of Debt (in thousands, except for %)
Year
Secured Debt
 
Unsecured Debt
 
Credit Facilities
 
Total Debt
 
Average Interest Rate
2015


 
$
150,000

 
$
5,000

 
$
155,000

 
5.3%
2016
$
159,456

 

 
45,000

 
204,456

 
4.3%
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


 


 


 

 
—%
2025


 


 


 

 
—%
Thereafter


 
50,000

 


 
50,000

 
7.4%
Scheduled principal payments
$
386,156

 
$
750,000

 
$
50,000

 
$
1,186,156

 
4.9%
Scheduled amortization payments
28,344

 

 

 
28,344

 
4.7%
Net discounts/premiums
4,025

 
(2,792
)
 

 
1,233

 
—%
Total maturities
$
418,525

 
$
747,208

 
$
50,000

 
$
1,215,733

 
4.9%
Weighted average maturity = 4.8 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 December 31, 2014
 
Covenant
 
Quarter Ended December 31, 2014
 
Covenant
 
Quarter Ended December 31, 2014
 
Covenant
% of Total Indebtedness to Total Assets(1)
43.8
%
 
≤ 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)
15.1
%
 
≤ 40.0%
 
 N/A

 
N/A
 
 N/A

 
N/A
Ratio of Total Unencumbered Assets(2) to Total Unsecured Indebtedness
2.7

 
≥ 1.5
 
 N/A

 
N/A
 
 N/A

 
N/A
Tangible Net Worth(3)
 N/A

 
N/A
 
$
905.8
 million
 
≥ $673.4 million
 
$
907.1
 million
 
≥ $671.9 million
% of Total Liabilities to Gross Asset Value(5)
 N/A

 
N/A
 
52.7
%
 
≤ 60.0%
 
52.7
%
 
≤ 60.0%
% of Secured Indebtedness to Gross Asset Value(5)
 N/A

 
N/A
 
17.1
%
 
≤ 35.0%
 
17.1
%
 
≤ 35.0%
Ratio of EBITDA(4) to Fixed Charges(6)
 N/A

 
N/A
 
2.58

 
≥ 1.50
 
2.58

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

 
N/A
 
2.44

 
≥ 1.67
 
2.44

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

 
N/A
 
3.60

 
≥ 2.00
 
3.60

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

 
N/A
 
3.7
%
 
≤ 15.0%
 
3.7
%
 
≤ 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 redevelopment and development costs upon commencement of construction, if any.

12



        

Capital Analysis
(In thousands, except per share amounts)
 
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
Market Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares Outstanding
67,819

 
66,663

 
66,636

 
66,630

 
66,531

Market Price per Share
$
27.66

 
$
25.38

 
$
25.98

 
$
23.88

 
$
23.36

Equity Market Capitalization
$
1,875,874

 
$
1,691,907

 
$
1,731,203

 
$
1,591,124

 
$
1,554,164

 
 
 
 
 
 
 
 
 
 
Total Debt
$
1,215,733

 
$
1,165,412

 
$
1,153,931

 
$
1,151,189

 
$
1,141,374

Total Market Capitalization
$
3,091,607

 
$
2,857,319

 
$
2,885,134

 
$
2,742,313

 
$
2,695,538

 
 
 
 
 
 
 
 
 
 
Total Debt to Market Capitalization
0.39
:1
 
0.41
:1
 
0.40
:1
 
0.42
:1
 
0.42
:1
 
 
 
 
 
 
 
 
 
 
Earnings to Fixed Charges(1)
1.1x

 
1.2x

 
1.1x

 
0.8x

 
0.7x

Debt Service Coverage Ratio(2)
2.6x

 
2.7x

 
2.5x

 
2.3x

 
2.5x

 
 
 
 
 
 
 
 
 
 
Dividend Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Dividends Paid
$
20,124

 
$
20,019

 
$
20,042

 
$
20,092

 
$
19,972

Common Dividend per Share
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

Payout Ratio (Core FFO per share basis)
69.8
%
 
69.8
%
 
73.2
%
 
83.3
%
 
71.4
%
Payout Ratio (Core FAD per share basis)
150.0
%
 
100.0
%
 
120.0
%
 
107.1
%
 
130.4
%
Payout Ratio (FAD per share basis)
157.9
%
 
103.4
%
 
136.4
%
 
130.4
%
 
187.5
%
 
 
 
 
 
 
 
 
 
 
(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 Rate Growth
2014 vs. 2013
 

 
 
Three Months Ended December 31, (1)
 
 
 
 
 
Twelve Months Ended December 31, (2)
 
 
 
 
 
 
2014
 
2013
 
% Change
 
Rental Rate Growth
 
2014
 
2013
 
% Change
 
Rental Rate Growth
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash Basis:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
$
8,848

 
$
8,339

 
6.1
%
 
(1.6
)%
 
$
31,706

 
$
31,247

 
1.5
%
 
(0.4
)%
Office
 
23,501

 
21,902

 
7.3
%
 
1.6
 %
 
91,761

 
86,195

 
6.5
%
 
1.3
 %
Retail
 
11,821

 
10,589

 
11.6
%
 
(0.5
)%
 
45,068

 
42,197

 
6.8
%
 
0.2
 %
Overall Same-Store Portfolio
 
$
44,170

 
$
40,830

 
8.2
%
 
0.4
 %
 
$
168,535

 
$
159,639

 
5.6
%
 
0.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Basis:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
$
8,854

 
$
8,476

 
4.5
%
 
(1.7
)%
 
$
31,822

 
$
31,788

 
0.1
%
 
(0.4
)%
Office
 
23,562

 
22,119

 
6.5
%
 
1.5
 %
 
92,276

 
87,058

 
6.0
%
 
1.4
 %
Retail
 
12,106

 
10,643

 
13.7
%
 
0.2
 %
 
45,617

 
42,308

 
7.8
%
 
0.5
 %
Overall Same-Store Portfolio
 
$
44,522

 
$
41,238

 
8.0
%
 
0.5
 %
 
$
169,715

 
$
161,154

 
5.3
%
 
0.8
 %
(1) Non same-store properties were:
Acquisitions:
Multifamily - Yale West
Office - Army Navy Club and 1775 Eye Street, NW
Retail - Spring Valley Retail Center
Development/Redevelopment:
Office - Silverline Center (formerly 7900 Westpark Drive)         
Held for sale and sold properties classified as continuing operations:
Retail - 5740 Columbia Road (parcel at Gateway Overlook)
Held for sale and sold properties classified as discontinued operations:
Medical Office/Office - The Medical Office Portfolio (see Supplemental Definitions on page 32 for list of properties included in the Medical Office Portfolio)
  
(2) Non same-store properties were the same listed above in footnote 1, with the addition of The Paramount, a multifamily acquisition in 2013.


14




Same-Store Portfolio Net Operating Income (NOI) Detail
(In thousands)
 
 
Three Months Ended December 31, 2014
 
Multifamily
 
Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
14,329

 
$
37,050

 
$
15,255

 
$

 
$
66,634

Non same-store - acquired and in development(1)
1,428

 
5,498

 
799

 

 
7,725

                         Total
15,757

 
42,548

 
16,054

 

 
74,359

 
 
 
 
 
 
 
 
 
 
Real estate expenses
 
 
 
 
 
 
 
 
 
Same-store portfolio
5,475

 
13,488

 
3,149

 

 
22,112

Non same-store - acquired and in development(1)
762

 
2,836

 
201

 

 
3,799

                         Total
6,237

 
16,324

 
3,350

 

 
25,911

 
 
 
 
 
 
 
 
 
 
Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
Same-store portfolio
8,854

 
23,562

 
12,106

 

 
44,522

Non same-store - acquired and in development(1)
666

 
2,662

 
598

 

 
3,926

                          Total
$
9,520

 
$
26,224

 
$
12,704

 
$

 
$
48,448

 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI GAAP basis (from above)
$
8,854

 
$
23,562

 
$
12,106

 
$

 
$
44,522

Straight-line revenue, net for same-store properties

 
(534
)
 
(290
)
 

 
(824
)
FAS 141 Min Rent
(6
)
 
66

 
(58
)
 

 
2

Amortization of lease intangibles for same-store properties

 
407

 
63

 

 
470

Same-store portfolio NOI, cash basis
$
8,848

 
$
23,501

 
$
11,821

 
$

 
$
44,170

Reconciliation of NOI to net income:
 
 
 
 
 
 
 
 
 
Total NOI
$
9,520

 
$
26,224

 
$
12,704

 
$

 
$
48,448

Depreciation and amortization
(3,997
)
 
(16,580
)
 
(3,690
)
 
(236
)
 
(24,503
)
General and administrative expenses

 

 

 
(5,981
)
 
(5,981
)
Acquisition costs

 

 

 
(663
)
 
(663
)
Interest expense
(2,524
)
 
(3,019
)
 
(242
)
 
(9,398
)
 
(15,183
)
Other income

 

 

 
191

 
191

Net Income
2,999

 
6,625

 
8,772

 
(16,087
)
 
2,309

Net income attributable to noncontrolling interests

 

 

 
21

 
21

Net income attributable to the controlling interests
$
2,999

 
$
6,625

 
$
8,772

 
$
(16,066
)
 
$
2,330

 
 
 
 
 
 
 
 
 
 
(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 December 31, 2013
 
Multifamily
 
Office
 
Medical Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
14,147

 
$
35,470

 
$

 
$
14,050

 
$

 
$
63,667

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

 
3,020

 

 
34

 

 
3,054

                         Total
14,147

 
38,490

 

 
14,084

 

 
66,721

Real estate expenses
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
5,671

 
13,351

 

 
3,407

 

 
22,429

Non same-store - acquired and in development(1)
146

 
1,245

 

 
6

 

 
1,397

                         Total
5,817

 
14,596

 

 
3,413

 

 
23,826

Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
8,476

 
22,119

 

 
10,643

 

 
41,238

Non same-store - acquired and in development(1)
(146
)
 
1,775

 

 
28

 

 
1,657

                          Total
$
8,330

 
$
23,894

 
$

 
$
10,671

 
$

 
$
42,895

 
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI GAAP basis (from above)
$
8,476

 
$
22,119

 
$

 
$
10,643

 
$

 
$
41,238

Straight-line revenue, net for same-store properties
(4
)
 
(455
)
 

 
(65
)
 

 
(524
)
FAS 141 Min Rent
(133
)
 
67

 

 
(54
)
 

 
(120
)
Amortization of lease intangibles for same-store properties

 
171

 

 
65

 

 
236

Same-store portfolio NOI, cash basis
$
8,339

 
$
21,902

 
$

 
$
10,589

 
$

 
$
40,830

Reconciliation of NOI to net income:
 
 
 
 
 
 
 
 
 
 
 
Total NOI
$
8,330

 
$
23,894

 
$

 
$
10,671

 
$

 
$
42,895

Depreciation and amortization
(3,700
)
 
(14,961
)
 

 
(3,440
)
 
(311
)
 
(22,412
)
General and administrative expense

 

 

 

 
(5,818
)
 
(5,818
)
Acquisition costs

 

 

 

 
(817
)
 
(817
)
Interest expense
(1,912
)
 
(2,579
)
 

 
(261
)
 
(10,877
)
 
(15,629
)
Other income

 

 

 

 
221

 
221

Loss on extinguishment of debt

 

 

 

 
(2,737
)
 
(2,737
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
Income from operations of properties sold or held for sale(1)

 
292

 
3,964

 

 

 
4,256

Gain on sale of real estate

 

 

 

 
18,949

 
18,949

Net income
2,718

 
6,646

 
3,964

 
6,970

 
(1,390
)
 
18,908

Net income attributable to noncontrolling interests

 

 

 

 

 

Net income attributable to the controlling interests
$
2,718

 
$
6,646

 
$
3,964

 
$
6,970

 
$
(1,390
)
 
$
18,908

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

16




Same-Store Net Operating Income (NOI) Detail
(In thousands)
 
 
Twelve Months Ended December 31, 2014
 
Multifamily
 
Office
 
Medical Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
53,647

 
$
146,542

 
$

 
$
59,418

 
$

 
$
259,607

Non same-store - acquired and in development 1
8,611

 
19,574

 

 
845

 

 
29,030

                         Total
62,258

 
166,116

 

 
60,263

 

 
288,637

Real estate expenses
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
21,825

 
54,266

 

 
13,801

 

 
89,892

Non same-store - acquired and in development 1
3,945

 
9,637

 

 
221

 

 
13,803

                         Total
25,770

 
63,903

 

 
14,022

 

 
103,695

Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
31,822

 
92,276

 

 
45,617

 

 
169,715

Non same-store - acquired and in development 1
4,666

 
9,937

 

 
624

 

 
15,227

                          Total
$
36,488

 
$
102,213

 
$

 
$
46,241

 
$

 
$
184,942

 
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI GAAP basis (from above)
$
31,822

 
$
92,276

 
$

 
$
45,617

 
$

 
$
169,715

Straight-line revenue, net for same-store properties
11

 
(1,843
)
 

 
(594
)
 

 
(2,426
)
FAS 141 Min Rent
(127
)
 
228

 

 
(213
)
 

 
(112
)
Amortization of lease intangibles for same-store properties

 
1,100

 

 
258

 

 
1,358

Same-store portfolio NOI, cash basis
$
31,706

 
$
91,761

 
$

 
$
45,068

 
$

 
$
168,535

Reconciliation of NOI to net income:
 
 
 
 
 
 
 
 
 
 
 
Total NOI
$
36,488

 
$
102,213

 
$

 
$
46,241

 
$

 
$
184,942

Depreciation and amortization
(17,999
)
 
(63,768
)
 

 
(13,282
)
 
(962
)
 
(96,011
)
General and administrative expenses

 

 

 

 
(19,761
)
 
(19,761
)
Acquisition costs

 

 

 

 
(5,710
)
 
(5,710
)
Interest expense
(9,313
)
 
(11,606
)
 

 
(997
)
 
(37,869
)
 
(59,785
)
Other income

 

 

 

 
825

 
825

Gain on sale of real estate

 

 

 

 
570

 
570

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

 


 
546

 

 

 
546

Gain on sale of real estate

 

 

 

 
105,985

 
105,985

Income tax expense on sale of real estate

 

 

 

 


 

Net Income
9,176

 
26,839

 
546

 
31,962

 
43,078

 
111,601

Net income attributable to noncontrolling interests

 

 

 

 
38

 
38

Net income attributable to the controlling interests
$
9,176

 
$
26,839

 
$
546

 
$
31,962

 
$
43,116

 
$
111,639

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

17




Same-Store Net Operating Income (NOI) Detail
(In thousands)
 
 
Twelve Months Ended December 31, 2013
 
Multifamily
 
Office
 
Medical Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
53,589

 
$
139,270

 
$

 
$
56,055

 
$

 
$
248,914

Non same-store - acquired and in development 1
907

 
13,069

 

 
134

 

 
14,110

                         Total
54,496

 
152,339

 

 
56,189

 

 
263,024

Real estate expenses
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
21,801

 
52,212

 

 
13,747

 

 
87,760

Non same-store - acquired and in development 1
431

 
5,081

 

 
21

 

 
5,533

                         Total
22,232

 
57,293

 

 
13,768

 

 
93,293

Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
31,788

 
87,058

 

 
42,308

 

 
161,154

Non same-store - acquired and in development 1
476

 
7,988

 

 
113

 

 
8,577

                          Total
$
32,264

 
$
95,046

 
$

 
$
42,421

 
$

 
$
169,731

 
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI GAAP basis (from above)
$
31,788

 
$
87,058

 
$

 
$
42,308

 
$

 
$
161,154

Straight-line revenue, net for same-store properties
6

 
(1,672
)
 

 
(67
)
 

 
(1,733
)
FAS 141 Min Rent
(547
)
 
223

 

 
(289
)
 

 
(613
)
Amortization of lease intangibles for same-store properties

 
586

 

 
245

 

 
831

Same-store portfolio NOI, cash basis
$
31,247

 
$
86,195

 
$

 
$
42,197

 
$

 
$
159,639

Reconciliation of NOI to Net Income
 
 
 
 
 
 
 
 
 
 
 
Total NOI
$
32,264

 
$
95,046

 
$

 
$
42,421

 
$

 
$
169,731

Depreciation and amortization
(12,691
)
 
(58,183
)
 

 
(13,730
)
 
(1,136
)
 
(85,740
)
General and administrative expenses

 

 

 

 
(17,535
)
 
(17,535
)
Acquisition costs

 

 

 

 
(1,265
)
 
(1,265
)
Interest expense
(6,973
)
 
(10,332
)
 

 
(1,072
)
 
(45,196
)
 
(63,573
)
Other income

 

 

 

 
926

 
926

Loss on extinguishment of debt

 

 

 

 
(2,737
)
 
(2,737
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
Income from operations of properties sold or held for sale (1)

 
1,351

 
14,044

 

 

 
15,395

Gain on sale of real estate

 

 

 

 
22,144

 
22,144

Net income
12,600

 
27,882

 
14,044

 
27,619

 
(44,799
)
 
37,346

Net income attributable to noncontrolling interests

 

 

 

 

 

Net income attributable to the controlling interests
$
12,600

 
$
27,882

 
$
14,044

 
$
27,619

 
$
(44,799
)
 
$
37,346

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

18




Net Operating Income (NOI) by Region
 
 
 
 
 
 
Washington REIT Portfolio
Maryland/Virginia/DC
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of
Q4 2014 GAAP NOI
 
Percentage of
YTD 2014 GAAP NOI
DC
 
 
 
 
Multifamily
 
5.9
%
 
5.4
%
Office
 
24.5
%
 
24.7
%
Retail
 
2.0
%
 
1.1
%
 
 
32.4
%
 
31.2
%
 
 
 
 
 
Maryland
 
 
 
 
Multifamily
 
2.7
%
 
2.7
%
Office
 
10.8
%
 
10.8
%
Retail
 
17.7
%
 
17.2
%
 
 
31.2
%
 
30.7
%
 
 
 
 
 
Virginia
 
 
 
 
Multifamily
 
11.0
%
 
11.6
%
Office
 
18.9
%
 
19.8
%
Retail
 
6.5
%
 
6.7
%
 
 
36.4
%
 
38.1
%
 
 
 
 
 
Total Portfolio
 
100.0
%
 
100.0
%

19




Same-Store and Overall Physical Occupancy Levels by Sector

 

 
 
Physical Occupancy - Same-Store Properties (1)
Sector
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
93.9
%
 
94.3
%
 
94.3
%
 
92.5
%
 
92.1
%
Office
 
92.1
%
 
91.8
%
 
90.6
%
 
86.9
%
 
86.6
%
Retail
 
94.5
%
 
94.4
%
 
94.2
%
 
93.6
%
 
91.3
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
93.2
%
 
93.2
%
 
92.6
%
 
90.2
%
 
89.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Physical Occupancy - All Properties
Sector
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
93.8
%
 
94.3
%
 
93.7
%
 
92.2
%
 
92.1
%
Office
 
86.9
%
 
87.1
%
 
86.2
%
 
83.7
%
 
85.7
%
Medical Office
 
%
 
%
 
%
 
%
 
89.0
%
Retail
 
94.4
%
 
94.4
%
 
94.2
%
 
93.6
%
 
91.3
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
90.5
%
 
90.7
%
 
90.1
%
 
88.4
%
 
88.8
%

(1) Non same-store properties were:
Acquisitions:
Multifamily - Yale West
Office - The Army Navy Club Building and 1775 Eye Street, NW
Retail - Spring Valley Shopping Center
Redevelopment:
Office - Silverline Center (formally 7900 Westpark Drive)    
Sold properties:
Retail - 5740 Columbia Road (parcel at Gateway Overlook)
Medical Office/Office - Transaction III and IV Medical Office Portfolio (Woodburn Medical Park I & II and Prosperity Medical Center I, II & III).



20




Same-Store Portfolio and Overall Economic Occupancy Levels by Sector
 
 
 
Economic Occupancy - Same-Store Properties(1)
Sector
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
94.2
%
 
94.5
%
 
93.3
%
 
91.7
%
 
92.2
%
Office
 
92.8
%
 
92.5
%
 
90.4
%
 
88.2
%
 
87.3
%
Retail
 
94.9
%
 
94.9
%
 
93.9
%
 
92.9
%
 
91.9
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
93.6
%
 
93.5
%
 
91.8
%
 
90.0
%
 
89.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Occupancy - All Properties
Sector
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
 
12/31/2013
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
94.2
%
 
94.1
%
 
92.6
%
 
91.6
%
 
92.2
%
Office
 
86.8
%
 
87.0
%
 
86.0
%
 
85.4
%
 
86.0
%
Medical Office
 
%
 
%
 
%
 
87.4
%
 
89.4
%
Retail
 
94.5
%
 
94.9
%
 
93.9
%
 
92.9
%
 
92.0
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
89.8
%
 
90.0
%
 
88.9
%
 
88.2
%
 
88.6
%


(1) Non same-store properties were:
Acquisitions:
Multifamily - Yale West
Office - The Army Navy Club Building and 1775 Eye Street, NW
Retail - Spring Valley Shopping Center
Redevelopment:
Office - Silverline Center (formally 7900 Westpark Drive)    
Held for sale and sold properties:
Retail - 5740 Columbia Road (parcel at Gateway Overlook)
Medical Office/Office - Transaction III and IV Medical Office Portfolio (Woodburn I & II and Prosperity I, II & III).



21



Acquisition and Disposition Summary
 
December 31, 2014
($'s in thousands)
Acquisition Summary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition Date
 
# of units
 
Square Feet
 
12/31/2014 Leased Percentage
 
Investment
 
Mortgage Assumed
Yale West
Washington, DC
February 21, 2014
 
216
 
 
 
95.4
%
 
$
73,000

 
$
48,221

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

 
97.5
%
 
79,000

 
52,640

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

 
65.4
%
 
104,500

 
N/A

Spring Valley Retail Center
Washington, DC
October 1, 2014
 
 
 
75,000

 
92.8
%
 
40,500

 
N/A

 
 
 
 

 
368,000

 
 
 
$
297,000

 
$
100,861

 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
 





22



Development/Redevelopment Summary
 
December 31, 2014
(in thousands)
Property and Location
Total Rentable Square Feet
or # of Units
Anticipated Total Cost
Cash Cost to Date
Draws on Construction Loan to Date
Construction Completion Date
Leased %
Development Summary
 
 
 
 
 
 
The Maxwell, Arlington, VA
163 units & 2,200 square feet retail
$
49,904

$
44,314

$
27,690

fourth quarter 2014
N/A (1)
 
 
 
 
 
 
 
Redevelopment Summary
 
 
 
 
 
 
Silverline Center (formerly 7900 Westpark Drive), Tysons, VA
529,000 square feet
$
35,000

$
25,058

N/A

anticipated in
first quarter 2015
59.7%

(1) Major construction activities at The Maxwell ended during December 2014. As of December 31, 2014, only two of the six residential floors were available for occupancy.



23




Commercial Leasing Summary - New Leases
 
 
 
 
4th Quarter 2014
 
3rd Quarter 2014
 
2nd Quarter 2014
 
1st Quarter 2014
 
4th Quarter 2013
Gross Leasing Square Footage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office
92,349
 
 
37,852
 
 
69,367
 
 
43,243
 
 
144,675
 
      Medical Office
 
 
 
 
 
 
 
 
3,826
 
      Retail
10,965
 
 
10,408
 
 
32,191
 
 
29,527
 
 
22,631
 
Total
103,314
 
 
48,260
 
 
101,558
 
 
72,770
 
 
171,132
 
Weighted Average Term (yrs)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office
8.5
 
 
7.4
 
 
5.8
 
 
7.3
 
 
7.2
 
      Medical Office
0.0
 
 
0.0
 
 
0.0
 
 
0.0
 
 
10.3
 
      Retail
9.2
 
 
9.8
 
 
10.2
 
 
9.6
 
 
7.8
 
Total
8.6
 
 
7.9
 
 
7.1
 
 
8.2
 
 
7.3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Rate Increases:
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
      Rate on expiring leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office
$
30.37

 
$
31.66

 
$
31.50

 
$
32.62

 
$
31.14

 
$
32.00

 
$
28.65

 
$
30.53

 
$
31.31

 
$
32.29

      Medical Office

 

 

 

 

 

 

 

 
29.56

 
31.13

      Retail
34.95

 
35.52

 
36.96

 
37.29

 
22.59

 
23.39

 
25.27

 
25.96

 
26.23

 
26.91

Total
$
30.85

 
$
32.07

 
$
32.68

 
$
33.63

 
$
28.24

 
$
29.08

 
$
27.28

 
$
28.68

 
$
30.42

 
$
31.35

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate on new leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office
$
38.39

 
$
34.43

 
$
33.77

 
$
30.68

 
$
35.71

 
$
33.40

 
$
32.53

 
$
29.86

 
$
33.78

 
$
31.31

      Medical Office

 

 

 

 

 

 

 

 
34.78

 
30.43

      Retail
41.82

 
37.65

 
43.69

 
38.76

 
22.07

 
21.36

 
30.77

 
27.66

 
27.74

 
26.04

Total
$
38.75

 
$
34.77

 
$
35.91

 
$
32.43

 
$
30.79

 
$
29.04

 
$
31.81

 
$
28.97

 
$
32.78

 
$
30.39

Percentage Increase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office
26.4
%
 
8.8
%
 
7.2
%
 
(5.9
)%
 
14.7
 %
 
4.4
 %
 
13.6
%
 
(2.2
)%
 
7.9
%
 
(3.0
)%
      Medical Office
%
 
%
 
%
 
 %
 
 %
 
 %
 
%
 
 %
 
17.7
%
 
(2.3
)%
      Retail
19.7
%
 
6.0
%
 
18.2
%
 
4.0
 %
 
(2.3
)%
 
(8.7
)%
 
21.7
%
 
6.5
 %
 
5.8
%
 
(3.2
)%
Total
25.6
%
 
8.4
%
 
9.9
%
 
(3.6
)%
 
9.0
 %
 
(0.1
)%
 
16.6
%
 
1.0
 %
 
7.8
%
 
(3.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tenant Improvements
Total Dollars
 
Dollars per Square Foot
 
Total Dollars
 
Dollars per Square Foot
 
Total Dollars
 
Dollars per Square Foot
 
Total Dollars
 
Dollars per Square Foot
 
Total Dollars
 
Dollars per Square Foot
Office Buildings
$
4,609,137

 
$
49.91

 
$
1,499,573

 
$
39.62

 
$
2,330,006

 
$
33.59

 
$
1,955,769

 
$
45.23

 
$
6,189,544

 
$
42.78

Medical Office Buildings

 

 

 

 

 

 

 

 
63,587

 
16.62

Retail Centers
120,600

 
11.00

 
162,180

 
15.58

 
1,616,068

 
50.20

 
38,923

 
1.32

 
215,340

 
9.52

Subtotal
$
4,729,737

 
$
45.78

 
$
1,661,753

 
$
34.43

 
$
3,946,074

 
$
38.86

 
$
1,994,692

 
$
27.41

 
$
6,468,471

 
$
37.80

Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
3,328,304

 
$
36.04

 
$
1,345,301

 
$
35.54

 
$
1,512,211

 
$
21.80

 
$
1,207,798

 
$
27.93

 
$
4,353,688

 
$
30.09

Medical Office Buildings

 

 

 

 

 

 

 

 
91,665

 
23.96

Retail Centers
275,428

 
25.12

 
291,731

 
28.03

 
300,287

 
9.33

 
388,220

 
13.15

 
180,197

 
7.96

Subtotal
$
3,603,732

 
$
34.88

 
$
1,637,032

 
$
33.92

 
$
1,812,498

 
$
17.84

 
$
1,596,018

 
$
21.93

 
$
4,625,550

 
$
27.03

Tenant Improvements and Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
7,937,441

 
$
85.95

 
$
2,844,874

 
$
75.16

 
$
3,842,217

 
$
55.39

 
$
3,163,567

 
$
73.16

 
$
10,543,232

 
$
72.87

Medical Office Buildings

 

 

 

 

 

 

 

 
155,252

 
40.58

Retail Centers
396,028

 
36.12

 
453,911

 
43.61

 
1,916,355

 
59.53

 
427,143

 
14.47

 
395,537

 
17.48

Total
$
8,333,469

 
$
80.66

 
$
3,298,785

 
$
68.35

 
$
5,758,572

 
$
56.70

 
$
3,590,710

 
$
49.34

 
$
11,094,021

 
$
64.83


24




Commercial Leasing Summary - Renewal Leases

 
 
4th Quarter 2014
 
3rd Quarter 2014
 
2nd Quarter 2014
 
1st Quarter 2014
 
4th Quarter 2013
Gross Leasing Square Footage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
575,499
 
 
44,214
 
 
109,686
 
 
60,108
 
 
201,109
 
      Medical Office Buildings
 
 
 
 
 
 
 
 
12,232
 
      Retail Centers
45,084
 
 
170,568
 
 
10,645
 
 
27,100
 
 
38,995
 
Total
620,583
 
 
214,782
 
 
120,331
 
 
87,208
 
 
252,336
 
Weighted Average Term (yrs)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
6.1
 
 
7.4
 
 
4.8
 
 
7.0
 
 
5.8
 
      Medical Office Buildings
0.0
 
 
0.0
 
 
0.0
 
 
0.0
 
 
7.8
 
      Retail Centers
6.8
 
 
5.1
 
 
4.3
 
 
3.3
 
 
4.0
 
Total
6.1
 
 
5.6
 
 
4.8
 
 
5.8
 
 
5.7
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Rate Increases:
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
      Rate on expiring leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
35.87

 
$
37.53

 
$
32.89

 
$
35.79

 
$
33.89

 
$
35.42

 
$
32.71

 
$
35.31

 
$
30.12

 
$
33.00

            Medical Office Buildings

 

 

 

 

 

 

 

 
32.36

 
34.47

            Retail Centers
33.21

 
35.65

 
13.65

 
13.86

 
45.12

 
47.17

 
27.54

 
30.66

 
17.51

 
18.22

Total
$
35.67

 
$
37.39

 
$
17.61

 
$
18.37

 
$
34.89

 
$
36.46

 
$
31.26

 
$
34.05

 
$
28.28

 
$
30.79

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Rate on new leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
37.25

 
$
35.44

 
$
44.95

 
$
41.11

 
$
36.12

 
$
34.39

 
$
37.02

 
$
34.06

 
$
35.30

 
$
32.88

            Medical Office Buildings

 

 

 

 

 

 

 

 
36.28

 
33.16

            Retail Centers
40.26

 
37.30

 
14.67

 
14.47

 
50.91

 
48.51

 
30.92

 
30.08

 
17.91

 
17.62

Total
$
37.46

 
$
35.57

 
$
20.90

 
$
19.95

 
$
37.42

 
$
35.64

 
$
35.36

 
$
33.03

 
$
32.66

 
$
30.53

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Percentage Increase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
3.9
%
 
(5.6
)%
 
36.7
%
 
14.9
%
 
6.6
%
 
(2.9
)%
 
13.2
%
 
(3.6
)%
 
17.2
%
 
(0.4
)%
            Medical Office Buildings
%
 
 %
 
%
 
%
 
%
 
 %
 
%
 
 %
 
12.1
%
 
(3.8
)%
            Retail Centers
21.2
%
 
4.6
 %
 
7.4
%
 
4.4
%
 
12.8
%
 
2.8
 %
 
12.3
%
 
(1.9
)%
 
2.3
%
 
(3.3
)%
Total
5.0
%
 
(4.9
)%
 
18.7
%
 
8.6
%
 
7.3
%
 
(2.3
)%
 
13.1
%
 
(3.0
)%
 
15.5
%
 
(0.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Dollars
 
Dollars per Square Foot
 
Total Dollars
 
Dollars per Square Foot
 
Total Dollars
 
Dollars per Square Foot
 
Total Dollars
 
Dollars per Square Foot
 
Total Dollars
 
Dollars per Square Foot
Tenant Improvements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
14,952,993

 
$
25.98

 
$
595,757

 
$
13.47

 
$
1,897,016

 
$
17.29

 
$
896,712

 
$
14.92

 
$
7,573,493

 
$
37.66

Medical Office Buildings

 

 

 

 

 

 

 

 
183,219

 
14.98

Retail Centers
33,370

 
0.74

 

 

 

 

 

 

 

 

Subtotal
$
14,986,363

 
$
24.15

 
$
595,757

 
$
2.77

 
$
1,897,016

 
$
15.76

 
$
896,712

 
$
10.28

 
$
7,756,712

 
$
30.74

Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
9,087,273

 
$
15.79

 
$
532,789

 
$
12.05

 
$
1,517,271

 
$
13.83

 
$
1,318,800

 
$
21.94

 
$
4,065,164

 
$
20.21

Medical Office Buildings

 

 

 

 

 

 

 

 
143,190

 
11.71

Retail Centers
192,343

 
4.27

 
51,270

 
0.30

 
27,278

 
2.56

 
32,300

 
1.19

 
32,725

 
0.84

Subtotal
$
9,279,616

 
$
14.96

 
$
584,059

 
$
2.72

 
$
1,544,549

 
$
12.84

 
$
1,351,100

 
$
15.49

 
$
4,241,079

 
$
16.80

Tenant Improvements and Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
24,040,266

 
$
41.77

 
$
1,128,546

 
$
25.52

 
$
3,414,287

 
$
31.12

 
$
2,215,512

 
$
36.86

 
$
11,638,657

 
$
57.87

Medical Office Buildings

 

 

 

 

 

 

 

 
326,409

 
26.69

Retail Centers
225,713

 
5.01

 
51,270

 
0.30

 
27,278

 
2.56

 
32,300

 
1.19

 
32,725

 
0.84

Total
$
24,265,979

 
$
39.11

 
$
1,179,816

 
$
5.49

 
$
3,441,565

 
$
28.60

 
$
2,247,812

 
$
25.77

 
$
11,997,791

 
$
47.54


25




10 Largest Tenants - Based on Annualized Commercial Income
 
December 31, 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
 
72
 
5.96
%
 
210,354

 
3.35
%
Advisory Board Company
2
 
53
 
3.80
%
 
199,762

 
3.18
%
Booz Allen Hamilton, Inc.
1
 
133
 
2.73
%
 
222,989

 
3.55
%
Engility Corporation
1
 
33
 
2.57
%
 
134,126

 
2.14
%
Squire Patton Boggs (USA) LLP
1
 
28
 
2.44
%
 
110,566

 
1.76
%
Epstein Becker & Green, PC
1
 
24
 
1.36
%
 
53,427

 
0.85
%
General Services Administration
3
 
47
 
1.28
%
 
52,282

 
0.83
%
George Washington University
2
 
20
 
1.28
%
 
69,775

 
1.11
%
Alexandria City School Board
1
 
173
 
1.19
%
 
87,883

 
1.40
%
Hughes Hubbard & Reed LLP
1
 
38
 
1.18
%
 
53,208

 
0.85
%
Total/Weighted Average
 
 
71
 
23.79
%
 
1,194,372

 
19.02
%



26




Industry Diversification
 
December 31, 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
$
72,743,514

 
37.73
%
 
2,163,074

 
34.06
%
Credit Intermediation and Related Activities
18,380,776

 
9.53
%
 
339,960

 
5.35
%
Religious, Grantmaking, Civic, Professional, and Similar Organizations
11,860,775

 
6.15
%
 
327,523

 
5.16
%
Food Services and Drinking Places
8,712,295

 
4.52
%
 
280,044

 
4.41
%
Educational Services
8,091,335

 
4.20
%
 
274,371

 
4.32
%
Food and Beverage Stores
6,625,178

 
3.44
%
 
334,922

 
5.27
%
Ambulatory Health Care Services
4,983,312

 
2.59
%
 
158,583

 
2.50
%
Executive, Legislative, and Other General Government Support
4,895,705

 
2.54
%
 
132,521

 
2.09
%
Furniture and Home Furnishings Stores
4,395,442

 
2.28
%
 
216,318

 
3.41
%
Health and Personal Care Stores
3,919,474

 
2.03
%
 
107,853

 
1.70
%
Securities, Commodity Contracts, and Other Financial Investments and Related Activities
3,675,793

 
1.91
%
 
102,022

 
1.61
%
Personal and Laundry Services
3,583,878

 
1.86
%
 
111,799

 
1.76
%
Sporting Goods, Hobby, Book, and Music Stores
3,318,522

 
1.72
%
 
201,827

 
3.18
%
Electronics and Appliance Stores
3,067,458

 
1.59
%
 
169,094

 
2.66
%
Administrative and Support Services
2,986,850

 
1.55
%
 
82,199

 
1.29
%
Miscellaneous Store Retailers
2,923,561

 
1.52
%
 
152,620

 
2.40
%
Broadcasting (except Internet)
2,881,734

 
1.49
%
 
70,672

 
1.11
%
Publishing Industries (except Internet)
2,763,105

 
1.43
%
 
79,659

 
1.25
%
Clothing and Clothing Accessories Stores
2,602,345

 
1.35
%
 
134,838

 
2.12
%
Amusement, Gambling, and Recreation Industries
2,327,309

 
1.21
%
 
123,998

 
1.95
%
General Merchandise Stores
2,050,440

 
1.06
%
 
235,965

 
3.72
%
Nursing and Residential Care Facilities
1,837,275

 
0.95
%
 
66,810

 
1.05
%
Telecommunications
1,583,739

 
0.82
%
 
41,334

 
0.65
%
Real Estate
1,520,177

 
0.79
%
 
46,541

 
0.73
%
Merchant Wholesalers, Durable Goods
1,077,752

 
0.56
%
 
32,539

 
0.51
%
Social Assistance
962,910

 
0.50
%
 
40,408

 
0.64
%
Chemical Manufacturing
918,560

 
0.48
%
 
20,036

 
0.32
%
Building Material and Garden Equipment and Supplies Dealers
912,397

 
0.47
%
 
29,470

 
0.46
%
Insurance Carriers and Related Activities
799,607

 
0.41
%
 
25,182

 
0.40
%
Construction of Buildings
647,536

 
0.34
%
 
21,965

 
0.35
%
Motor Vehicle and Parts Dealers
601,815

 
0.31
%
 
36,832

 
0.58
%
Transportation Equipment Manufacturing
542,685

 
0.28
%
 
19,864

 
0.31
%
Repair and Maintenance
510,500

 
0.26
%
 
22,449

 
0.35
%
Other
4,088,993

 
2.13
%
 
147,924

 
2.33
%
Total
$
192,792,747

 
100.00
%
 
6,351,216

 
100.00
%

27




Lease Expirations
 
December 31, 2014
Year
 
Number of Leases
 
Rentable Square Feet
 
Percent of Rentable Square Feet
 
Annualized Rent (1)
 
Average Rental Rate
 
Percent of Annualized Rent (1)
Office:
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
90

 
388,741

 
9.22
%
 
$
13,758,719

 
$
35.39

 
8.18
%
2016
 
104

 
411,138

 
9.75
%
 
16,061,685

 
39.07

 
9.55
%
2017
 
84

 
520,648

 
12.35
%
 
20,385,122

 
39.15

 
12.12
%
2018
 
78

 
429,471

 
10.19
%
 
16,184,108

 
37.68

 
9.62
%
2019
 
83

 
620,918

 
14.73
%
 
25,429,569

 
40.95

 
15.12
%
2020 and thereafter
 
195

 
1,845,861

 
43.76
%
 
76,372,587

 
41.38

 
45.41
%
 
 
634

 
4,216,777

 
100.00
%
 
$
168,191,790

 
39.89

 
100.00
%
Retail:
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
48

 
216,599

 
9.49
%
 
$
4,908,465

 
$
22.66

 
9.22
%
2016
 
30

 
211,969

 
9.29
%
 
4,580,313

 
21.61

 
8.61
%
2017
 
48

 
261,640

 
11.46
%
 
7,076,420

 
27.05

 
13.29
%
2018
 
41

 
366,907

 
16.07
%
 
5,347,095

 
14.57

 
10.05
%
2019
 
37

 
166,823

 
7.31
%
 
4,975,812

 
29.83

 
9.35
%
2020 and thereafter
 
117

 
1,058,552

 
46.38
%
 
26,339,497

 
24.88

 
49.48
%
 
 
321

 
2,282,490

 
100.00
%
 
$
53,227,602

 
23.32

 
100.00
%
Total:
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
138

 
605,340

 
9.31
%
 
$
18,667,184

 
$
30.84

 
8.43
%
2016
 
134

 
623,107

 
9.59
%
 
20,641,998

 
33.13

 
9.32
%
2017
 
132

 
782,288

 
12.04
%
 
27,461,542

 
35.10

 
12.40
%
2018
 
119

 
796,378

 
12.25
%
 
21,531,203

 
27.04

 
9.72
%
2019
 
120

 
787,741

 
12.12
%
 
30,405,381

 
38.60

 
13.73
%
2020 and thereafter
 
312

 
2,904,413

 
44.69
%
 
102,712,084

 
35.36

 
46.40
%
 
 
955

 
6,499,267

 
100.00
%
 
$
221,419,392

 
34.07

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

28




Schedule of Properties
 
December 31, 2014
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET(1)
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

Silverline Center (formerly 7900 Westpark Drive)
 
Tysons, VA
 
1997
 
1972/1986/1999/2014
 
526,000

600 Jefferson Plaza
 
Rockville, MD
 
1999
 
1985
 
113,000

Wayne Plaza
 
Silver Spring, MD
 
2000
 
1970
 
99,000

Courthouse Square
 
Alexandria, VA
 
2000
 
1979
 
116,000

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
 
353,000

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

Fairgate at Ballston
 
Arlington, VA
 
2012
 
1988
 
142,000

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

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

Subtotal
 
 
 
 
 
 
 
4,853,000




29



Schedule of Properties
 
December 31, 2014
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET (1)
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

Spring Valley Retail Center
 
Washington, DC
 
2014
 
1941/1950
 
75,000

Subtotal
 
 
 
 
 
 
 
2,524,000



30



Schedule of Properties
 
December 31, 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

The Maxwell/163
 
Arlington, VA
 
2014
 
2014
 
143,000

Subtotal (3,053 units)
 
 
 
 
 
 
 
2,594,000

 
 
 
 
 
 
 
 
 
TOTAL
 
 
 
 
 
 
 
9,971,000

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


31




Supplemental Definitions

 
December 31, 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 executive retirements or resignations, (4) property impairments not already excluded from FFO, as appropriate and (5) relocation expense. 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 executive retirements or resignations, (4) property impairments not already excluded from FAD, as appropriate and (5) relocation expense. 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.

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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 consists 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.
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.



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